Strategies to Fund Coastal Ecosystems and Wetlands: Follow-up on Dual-Return Research Paper

Following up on our research paper on wetlands finance, we wanted to discuss again wetlands conservation finance this week.

Coastal ecosystems and wetlands are one of the most important ecosystems in the world due to the abundance of ecological, economic, and social benefits. Many plants and animals live within coastal wetlands. Wetlands also act as barriers against storms or floods while improving water quality through the filtration of pollutants. These areas are transitional and provide countless of plant and animals with habitats all while protecting the environment against natural disasters. To protect coastal wetlands, significant investments and financing mechanisms are required.

Why This Matters

• Unprecedented Threats: Coastal wetlands all over the world face threats from human-related activities, demonstrating the urgent need to engage in finance conservation efforts

• Strategies required: A variety of financial strategies are needed to generate funding as a response to human-related issues.

• Investment Gains: Investments can create measurable environmental and social impacts, but traditional funding sources are insufficient; this demonstrates the need to establish new financial instruments that attract private investment for these issues

• Wetland Conservations Bonds: A green bond issued by governments and can be utilized to attract investors through revenue streams, tax incentives, impacting reporting, and credit enhancements

Conservation Finance

I n a paper written by the Responsible Alpha, initiatives to preserve these coastal wetlands are highlighted. Conservation Finance efforts demonstrate strategies that utilize necessary instruments and strong impact measurement frameworks. Some potential strategies include: 

• Payments of Ecosystem Services (PES): Investors provide capital for conservation projects. Investors will receive payments from beneficiaries that gain from the services provided by the wetlands when predetermined environmental outcomes are achieved. 

• Wetland Conservation Funds: Funds that pool capital from various sources as a response to wetland conservation. Funds are then used to finance projects and support wetlands 

• Debt-for-nature Swaps" Part of a country’s external debt becomes forgiven in exchange for the government’s commitment to invest in wetland conservation  

 Revenue Streams

A financial instrument that attracts investors to provide wetland restoration is a Wetland Conservation Bond (WCB). Revenue streams act as a way to attract investors. Specific revenue streams depend on the location, types of wetland projects, funding, and stakeholders involved. Diversified revenue sources may help mitigate risks and provide more stable cash flow. The bounds can be backed by revenue streams from a variety of sources:

• Eco-tourism Fees and Taxes.

• Payments for Ecosystem Services (PES).

• Carbon Credits.

• Government Subsidies and Tax Incentives.

Payment for Ecosystem Services (PES)

PES has been utilized by many countries across the globe. In terms of Wetland Conservation Bonds, water utilities pay for wetland conservations to maintain water quality and supply. Additionally, coastal property owners may pay for wetland restoration to reduce flood and storm risks, and as a response to these environmental impacts, agricultural and industrial companies can pay for wetland protection.

In 2025, with the goal to strengthen the management of natural resources and promote sustainable finance, the United Nations Development Programme (UNDP) worked alongside the Institute of Strategy and Policy on Natural Resources and Environment (ISPONRE) to develop guidelines on these Payment for Ecosystem Services for wetland ecosystems in Vietnam. This demonstrates an example of how PES are used internationally with the support of multilateral organizations.

Potential Strategies

Preserving the world's vital coastal wetlands requires innovative approaches to finance conservation efforts. Traditional funding sources are insufficient, necessitating new financial instruments to attract private capital investment. Potential strategies include green bonds, environmental impact bonds, blue carbon credits, conservation funds and public-private partnerships. By aligning these financing mechanisms with countries' climate commitments under the Paris Agreement and the United Nations' Sustainable Development Goals, investments can simultaneously generate returns and drive measurable environmental and social impacts. With tailored strategies leveraging suitable instruments and robust impact measurement frameworks, substantial funding can be unlocked to safeguard these invaluable ecosystems.

The choice of financial instrument(s) would depend on factors such as the project scale, potential revenue streams, risk profiles, stakeholder involvement, and the specific conservation goals and priorities in a given region or country.

A selection of potential strategies are:

• Environmental Impact Bonds/Payments for Ecosystem Services (PES): Investors provide upfront capital for wetland restoration or conservation projects. If predetermined environmental outcomes are achieved, investors receive payments from beneficiaries (e.g., municipalities, water utilities, coastal property owners) who benefit from the ecosystem services provided by the wetlands. The payments act as returns for the investors, aligning financial incentives with conservation goals.

• Wetland Conservation Funds/Trusts: Establishment of dedicated funds or trusts that pool capital from various sources (governments, donors, investors) specifically for wetland conservation purposes. The funds can then be used to finance projects, provide loans or grants, or support other wetland-related activities. Potential revenue sources can include eco-tourism fees, carbon credits, endowments, or private investments.

• Blue Carbon Credits: Wetlands, such as mangrove forests and tidal marshes, are effective carbon sinks and can sequester significant amounts of carbon dioxide. Projects that restore or protect these wetlands can generate verified blue carbon credits, which can be traded on voluntary or compliance carbon markets. Revenues from the sale of these credits can finance wetland conservation efforts.

• Conservation Easements: Legal agreements between landowners and conservation organizations or government agencies to permanently limit development or certain land uses on private property. Landowners can receive tax benefits or direct payments in exchange for agreeing to conserve wetlands on their property. The easements can be funded through government programs, private donations, or investor capital.

• Debt-for-Nature Swaps: A portion of a country's external debt is forgiven in exchange for the government's commitment to invest funds in wetland conservation or environmental protection programs. This arrangement can involve creditor nations, multilateral institutions, and conservation organizations.

• Crowdfunding: Utilizing online crowdfunding platforms to raise funds from individuals, communities, and organizations for specific wetland conservation projects. Crowdfunding can engage the public, raise awareness, and provide an alternative source of financing for smaller-scale initiatives.

• Public-Private Partnerships (PPPs): Collaboration between public entities (governments, agencies) and private organizations (businesses, NGOs, investors) to jointly finance and implement wetland conservation projects. PPPs can leverage resources, expertise, and risk-sharing mechanisms from both sectors.

Take Action

• Business Owners: Establish responsible investment policies that acknowledges biodiversity and water protection.  

• Governments: implement policy that supports and enhances revenue streams as a way to aid WCB.

• Investors: Train teams on WBC, establish frameworks for nature risks and impacts, utilize resources that encourage responsible investment and conservation finance.  

• Aspiring Entrepreneurs: Understand and acknowledge the importance of biodiversity and finance and establish initiatives to facilitate sustainable transformations.

• Multilateral Organizations: Provide incentives for businesses to establish an organized investment framework geared towards protecting the environment and work with countries to create sustainable finance programs.