[Insight]
Nature-Based Solutions Are Now a Financing Category, Not a Theme
[Insight]
Nature-Based Solutions Are Now a Financing Category, Not a Theme
Opening Perspective
For most of the last decade, Nature-Based Solutions sat in the soft category of climate work. Side panels at conferences. Add-on lines in country plans. Earnest paragraphs in donor strategies. The capital that backed it was patchy and the methodologies were uneven. NbS was a theme.
That has changed. NbS is now a financing category with its own capital windows, its own methodologies, its own pricing logic, and its own regulatory architecture. The Green Climate Fund, the Adaptation Fund, the Global Environment Facility, the Climate Investment Funds, and the African Development Bank all run dedicated NbS pipelines. The voluntary carbon market has bifurcated, with high-integrity removal credits trading at meaningful premiums. Sovereign bonds linked to nature performance have entered the market. Blended vehicles, biodiversity finance instruments, and project preparation facilities for NbS exist where they did not five years ago.
For Kenya, this is the most consequential repositioning of development finance since the carbon markets emerged. The country has the natural endowment, the political signal, and a regulatory framework most of the continent does not yet have. What remains is converting all of that into financeable projects at the speed and scale the open window allows. The window is open now. It will not stay open indefinitely.
Where the Money Has Moved
Five years ago, dedicated NbS capital was difficult to find at scale. Today, it sits across four broad pools.
The first pool is the climate vertical funds. The Green Climate Fund has materially increased the share of its portfolio allocated to ecosystem-based adaptation and ecosystem-based mitigation. The Adaptation Fund's direct access modality has been used by African accredited entities to channel finance to community-level NbS work. The Global Environment Facility's biodiversity and land degradation focal areas have continued to expand. The Climate Investment Funds added a Nature, People and Climate programme.
The second pool is the development banks. The African Development Bank's Africa Climate Change Action Plan and its Climate Action Window under the African Development Fund both commit a defined share of resources to nature-positive investment. The World Bank's Global Programme on Sustainability and its Nature Action Plan have moved nature into the operational core of country programmes rather than a separate stream. The European Investment Bank, KfW, Agence Française de Développement, and the United States Development Finance Corporation each run climate and nature lending products that did not exist in their current form a decade ago.
The third pool is the carbon market. The voluntary market has matured and bifurcated. Removal credits, particularly from high-integrity afforestation, mangrove restoration, and improved forest management, trade at clear premiums. Avoidance credits with weak additionality have lost value. The Article 6 mechanisms under the Paris Agreement, including authorised internationally transferred mitigation outcomes, have begun to operationalise. Quality is now priced. Methodologies from Verra, Gold Standard, the ART TREES Standard, and the Climate Bonds Standard have professionalised the supply side.
The fourth pool is biodiversity and emerging instruments. The Global Biodiversity Framework Fund, established under the GEF, channels capital to projects aligned with the Kunming-Montreal Global Biodiversity Framework. The Taskforce on Nature-related Financial Disclosures has moved nature risk into corporate disclosure. Pilot Nature Performance Bonds, debt-for-nature swaps, and blue economy instruments have closed transactions in the last three years. Each is still small relative to climate finance. Each is growing fast.
Read together, NbS in 2026 is not a single fund or a single market. It is a portfolio of overlapping capital pools, each with its own entry standards, methodologies, and pricing. That is what makes it a financing category.
For Kenya, this is the most consequential repositioning of development finance since carbon markets emerged. The window is open now. It will not stay open indefinitely. Indonesia, Brazil, Colombia, Ghana, and Tanzania are moving on the same opportunity.
ACAL Advisory Team
Public Sector Advisory Practice
Four Things That Have Changed
1. NbS has matured into a project category with its own methodologies
Five years ago, the credibility problem in NbS was structural. Measurement was patchy. Additionality claims were weak. Permanence was unproven. The market discounted everything accordingly.
That has changed. Methodologies have professionalised. The ART TREES Standard sets jurisdictional REDD+ accounting. Verra's VM0033 covers tidal wetland and seagrass restoration. Gold Standard methodologies cover improved cookstoves, afforestation, and water restoration. The Climate Bonds Standard's resilience credit framework has formalised adaptation finance. Stacking revenue streams from carbon, biodiversity, water security, and resilience within a single project is now technically and contractually feasible where it was not.
Standardisation has reduced transaction costs. The buyers know what they are buying. The sellers know how to deliver it. The intermediaries know how to structure it. None of these were true at the same level in 2020.
2. Demand has scaled and bifurcated
The voluntary carbon market is not one market. It is two markets that operate in the same space.
The first is the market for high-integrity, high-removal, community-positive credits. Premium prices. Long-dated demand from corporates with net-zero commitments backed by science-based targets. Limited supply globally. Strict due diligence. Buyers willing to pay multiples of the prior market clearing price for credits that meet integrity standards.
The second is the market for legacy avoidance credits with weak additionality and unclear permanence. Significant discount. Slow demand. Reputational risk attached. Increasingly difficult to sell into any serious corporate buyer.
This bifurcation is what changed the economics. NbS projects that meet the integrity bar can command prices that make them genuinely investable. Projects that cannot meet that bar struggle to clear. The signal is clear. Quality is now priced and the premium is significant.
Beyond carbon, demand has also scaled in adaptation finance, sustainable land use, and the blue economy. The categories are increasingly distinct in funder strategies. The sophistication of buyers, both public and corporate, has risen.
3. Africa, and Kenya specifically, is structurally positioned
Globally, the supply of high-quality NbS sits in three places. Sub-Saharan Africa. Latin America. Southeast Asia. The mangroves, montane forests, drylands, peatlands, and tropical forests that anchor the supply curve are not evenly distributed.
Kenya holds a high-value share of that supply. The mangroves of Lamu, Kilifi, Kwale, Tana River, and Mombasa are among the most productive blue carbon ecosystems in the western Indian Ocean. The montane forests of Mount Kenya, the Aberdares, Mount Elgon, the Mau complex, and the Cherangani Hills anchor the country's water and biodiversity systems. The drylands and rangelands of the north, where pastoralist livelihoods overlap with vast areas of degraded but recoverable land, present some of the largest single restoration opportunities on the continent.
Kenya also has something most African countries do not yet have. The Climate Change (Amendment) Act, 2023 introduced a domestic carbon markets framework. The Climate Change (Carbon Markets) Regulations, 2024 operationalised it. The Designated National Authority sits at the National Treasury. The Carbon Markets Authority is established. The legislative scaffolding for participation in international and domestic carbon markets exists. Most of the continent is still building it.
The 15 billion tree growing commitment provides political tailwind. The National Climate Change Action Plan 2023 to 2027 sets the strategic frame. The National Adaptation Plan sets the long horizon. The Kenya Forest Service, the National Environment Management Authority, the Water Resources Authority, the Kenya Forestry Research Institute, and the County Governments are the institutional carriers.
None of this guarantees performance. But it does mean Kenya is structurally further ahead than most peers on policy and natural capital. The constraint is not the endowment or the framework. It is the conversion of both into transaction-ready projects.
4. The bottleneck is project preparation and tenure, not capital
The conventional view that NbS underperforms because it is not financeable is out of date. Capital has shifted. Standards have shifted. What has not moved fast enough is the operational layer that delivers projects.
The constraints are familiar to anyone who has worked on landscape-level investments. Project preparation budgets are thin, and NbS preparation requires expertise that most countries are still acquiring. MRV systems for stacked revenue streams are technically demanding. Land tenure remains the hardest issue. Many of the highest-value NbS landscapes sit on community land, trust land, or unregistered land where benefit-sharing arrangements need to be designed from scratch. Community Forest Associations, Community Land Management Committees, and group ranch structures vary widely in maturity. Standardised benefit-sharing protocols do not exist at national scale.
Solving these is not glamorous. It is project preparation work, legal work, valuation work, MRV system build, and community engagement at a level most donor programmes have not invested in adequately. It is also exactly what unlocks the capital pools that have opened. The countries that build this operational layer first will absorb the capital first.
Implications
For National Government
The Carbon Markets Authority, the Designated National Authority at the Treasury, the National Environment Management Authority, the Kenya Forest Service, and the Water Resources Authority need an explicit operational plan to convert the regulatory framework into a pipeline. The plan should set a measurable target for transaction-ready NbS projects across blue carbon, montane forest, dryland restoration, and rangeland improvement. It should clarify benefit-sharing protocols, particularly for community-held land. It should establish a single front door for project developers and verifiers so that approval timelines are predictable. None of this requires new legislation. It requires execution.
For Counties
County governments are where most NbS implementation will sit, and where most community engagement happens. Counties with high-value NbS landscapes should treat NbS pipeline development as a CIDP priority, not a niche environmental concern. The opportunity is significant in revenue terms. Lamu, Kilifi, Kwale, Tana River, Taita Taveta, the Mt Kenya counties, the Mau counties, and the northern ASAL counties each hold transaction-ready opportunity. Counties that build NbS units in their environment and natural resources departments, in partnership with national agencies and donor TA, will move first. Those that wait for transactions to arrive will not see them.
For Donors and DFIs
Three areas concentrate impact. The first is sustained TA to project preparation, MRV, and land tenure work at the operational level. The second is anchor investment in early high-integrity transactions to set the market reference price for Kenyan NbS credits. The third is institutional support to the Carbon Markets Authority, the National Treasury DNA, and the Kenya Forest Service as they build the standing capability the framework requires. The financing windows in vertical funds and DFI portfolios are open. Conversion to disbursement depends on the depth of project preparation done in country.
For Communities and Civil Society
The single most consequential change in the next two years will be how benefit sharing is structured between project developers, county governments, and communities. Communities organised through credible CFAs, CLMCs, group ranches, and conservancy structures, with clear governance and equitable benefit protocols, will be the counterparties developers prefer. Communities that engage late, or whose internal governance is contested, will lose either the project or the benefit. Civil society organisations have an important role in supporting community-side readiness so that the benefit accrues where the natural capital sits.
For Private Capital
Project developers, carbon project intermediaries, and impact investors should anticipate that the highest-value Kenyan NbS pipeline will be developed through partnerships with Kenyan institutions, counties, and communities rather than acquired as packaged transactions. Premium pricing in the integrity market makes patient project development viable. The historical pattern of foreign developers extracting value with limited local benefit will increasingly be priced and regulated against. The next generation of Kenyan NbS transactions will look more like co-developed programmes than commodity credit purchases.
Closing Perspective
Nature-Based Solutions are no longer waiting for capital. The capital has arrived. It is patient, it is strategic, and it is priced for quality. The question for Kenya is no longer whether financing exists. It is whether project preparation, land tenure, MRV, and benefit sharing can be built quickly enough to absorb the open window.
Other markets are racing to do the same. Indonesia, Brazil, Colombia, Ghana, and Tanzania are each moving on the same opportunity. The countries that build the operational layer fastest will set the market reference for the next decade. The countries that wait will find the premium has moved by the time their projects are ready.
Kenya has the endowment. It has the framework. It has the political signal. It has, in the Carbon Markets Regulations and the Climate Change Act, a regulatory base that most of the continent lacks. The work that remains is unglamorous, operational, and patient. Project preparation pipelines. Land tenure clarity. MRV systems. Benefit-sharing protocols. Community organisation. Quality verification.
This is not a question of whether NbS becomes a category in Kenyan development finance. It already has. The question is whether the institutional muscle to access it gets built at the speed the open window requires. That is the operational call to act on this year, not next.
ACAL Consulting Africa Limited is a development advisory practice retained by governments, donors, and development finance institutions across East Africa. We work at the intersection of policy, capital, and delivery.
Strategic Insights That Drive Business Success
Strategic Insights That Drive Business Success
Strategic Insights That Drive Business Success
