Nature as Infrastructure: A Green Investment Strategy for Climate-Resilient Cities
Introduction
As over half of the global population now lives in cities, and with that figure expected to reach 75% by 2050, urban centers have become the baseline for the climate crisis. Climate change adaptation and biodiversity conservation are no longer optional. They are essential for maintaining livability, economic resilience, and long-term value in our urban infrastructure.
To future-proof cities, forward-thinking leaders must redefine infrastructure, not just as concrete and steel, but as nature-based infrastructure that delivers carbon sequestration, flood mitigation, and community wellbeing. This is the next frontier in sustainable urban development.
The Infrastructure Paradigm Shift
Urban decision-makers now face growing climate and financial risks: infrastructure damage, asset depreciation, service disruptions, and escalating public and investor expectations around sustainability. It’s no longer enough for roads, sewers, and green spaces to function in isolation. Infrastructure must now deliver on a broader mandate: climate resilience, economic value, and environmental performance.
Investing in nature-based solutions (NbS), such as green roofs, wetlands, urban forests, and bioswales, unlocks all these outcomes and more.
According to the World Economic Forum, NbS can outperform grey, traditional, built infrastructure in cost-effectiveness, ecosystem services, and long-term impact, yet they receive less than 1% of global infrastructure investment.
As of July 2018, nearly 58% of global cities were highly exposed to at least one of the six main natural hazards: cyclones, floods, droughts, earthquakes, landslides and volcanic eruptions. These events now cost cities billions each year. And, with 75% of the global population projected to be living in cities by 2050, nature based improve urban resilience against climate challenges such as floods, heatwaves, and pollution; adding a much-needed layer of climate protection
This is the billion-dollar blind spot for investors, mayors, and executives alike.
What Are Nature-Based Solutions?
As a reminder, Nature-Based Solutions refer to urban infrastructure strategies that harness ecosystem functions, like water absorption, air purification, and cooling, to solve urban challenges. Examples include:
Green roofs and vertical gardens
Restored wetlands for flood control
Urban tree canopies for cooling and pollution absorption
Permeable pavements that mimic natural ground cover
River daylighting projects and bioswales
These are not “nice-to-haves.” They are climate-adaptive, cost-efficient, and performance-driven solutions that reduce emissions and improve urban quality of life. NbS can deliver 28% greater long-term value, with lower capital and operating costs over time (WEF).
What Are the Financial Challenges Facing Nature-Based Solutions
Despite their benefits, nature-based urban infrastructure is dramatically underfunded. Here’s why:
A primary barrier is the lack of clear revenue streams. Many NbS deliver public goods, externalities, like clean air, flood prevention, and cooler cities that are not priced into traditional economic models. As a result, cost-benefit analyses tend to undervalue them compared to grey infrastructure.
Risk assessment frameworks also fall short, often ignoring the escalating physical risks tied to climate change and biodiversity loss. This reinforces a market perception that NbS lack monetary value, and investment remains low.
Investors often lack key information on business opportunities, ROI and risk profiles related to NbS. Investors need to contend with over 600 ESG reporting provisions globally. The lack of harmonized standards creates gaps in measuring and comparing business performance for investors looking to invest in NbS. And while 85% of NbS funding currently comes from local governments, just 14% is private capital, and only 2% originates from Public official development aid - provided by donors and international finance institutions (IFI) such as the World Bank and the Asian Development Bank.
Scale is another challenge. Many NbS projects involve small ticket sizes and emerging revenue models. In some cases, returns depend on mechanisms like Payments for Ecosystem Services (PES), where land stewards are compensated for conservation efforts. For example, in India, the Palampur Municipal Council pays INR 10,000 annually to the Village Forest Development Society to protect the Bheerni forest and ensure sustainable water supply for the city, a 20-year agreement that reflects a new model for nature-based public service delivery.
In short, today’s financial systems undervalue biodiversity and ecosystem outcomes. But with the right incentives, policies, and frameworks, NbS can become bankable assets, just as we've seen in the broader evolution of climate finance and green tech.
Smart Technology Is Making Nature-Based Solutions Investable
Historically, natural capital investments were difficult to quantify, undermining their appeal to financiers. But that’s changing, fast. Technology now enables accurate monitoring, modeling, and valuation of green infrastructure:
IoT-enabled sensors monitor the real-time performance of green infrastructure (soil moisture, temperature, water flow)
AI and digital twins model ecosystem performance in flood, heat, and growth scenarios
Remote sensing and geospatial analytics identify high-impact areas for nature-based interventions
Blockchain-backed biodiversity and carbon credit markets support high-integrity investment tracking
Together, these tools are creating a new asset class: tech-enabled natural infrastructure, measurable, investable, and scalable.
But, How do we Unlock Funding for NbS?
Unlocking funding for nature-based solutions (NbS) requires a system-wide approach combining technology to mainstream biodiversity data, policy and regulatory incentives, and innovative financial mechanisms. This section focuses on the latter.
Novel investment models are key to mobilizing capital at scale by reshaping the risk-return profile of NbS and land-sparing interventions. Well-designed instruments can overcome barriers such as perceived ROI risks and limited project pipelines. Several models show strong potential:
Catalytic Capital: Governments and development finance institutions (DFIs) can act as cornerstone investors, deploying catalytic capital through tools like green or conservation bonds, resilience bonds, and credit facilities for habitat and water projects. Blended finance, which combines development and philanthropic capital to de-risk private investment, is particularly suited to supporting smaller-scale or emerging NbS opportunities.
Exchange-Listed Funds: Green exchange-traded funds (ETFs) expand investor access and address liquidity concerns. By lowering minimum investment thresholds, they open NbS financing to retail markets. In China, seven of the top 10 performing ETFs in early 2021 were green energy-themed, showing strong growth potential.
Carbon Exchanges: Platforms like Climate Impact X (founded by DBS Bank, Singapore Exchange, Standard Chartered, and Temasek) are scaling access to high-quality carbon credits, especially for hard-to-abate sectors. These exchanges offer transparency, standardization, and scalability, helping accelerate investment in urban reforestation and ecosystem restoration.
Debt-for-Nature Swaps: Particularly impactful for resource-constrained governments, these swaps trade national debt relief for ecosystem protection. In 2021, Belize restructured its sovereign bond at 55 cents on the dollar in exchange for commitments to safeguard marine biodiversity, a model backed by major creditors.
Insurance for nature: Finally, insurance has a critical role to play in innovations that mitigate risks associated with climate change and biodiversity loss in cities. By combining private capital with public resources to fund insurance, regional governments can plan more consciously to protect the green infrastructure. This blended insurance product provides rapid payouts to fund essential reef restoration measures following climate events.
Conclusion: The Bottom Line
As climate risks escalate and urban populations grow, the need for adaptive, affordable, and sustainable infrastructure has never been clearer. The case for investing in nature-based infrastructure is no longer just environmental, it’s economic.
To capture the full value of nature-based infrastructure, leaders must take a strategic, integrated approach. This includes embedding Nature-based Solutions (NbS) into capital investment strategies and masterplans, while modernizing procurement frameworks to prioritize and reward green performance metrics. Collaboration with technology innovators is essential to digitize performance monitoring and enhance ROI analysis. Aligning with global standards such as the Taskforce on Nature-related Financial Disclosures (TNFD) ensures credibility and consistency in environmental reporting. Finally, activating blended finance tools, such as green bonds, impact funds, and public-private mechanisms, is critical to scaling investment and accelerating the transition to resilient, nature-positive systems.
Smart cities will not just be digitally connected. They will be rooted in nature- designed with intelligence, resilience, and biodiversity in mind.
