Four steps for financing nature‑based solutions in cities
Cities are increasingly facing higher temperatures, extreme weather events and social inequality. In this context, nature offers practical ways to strengthen urban resilience. Nature‑based solutions (NbS) - such as urban forests, green corridors, wetland restoration, sponge parks - can help cities promote biodiversity, manage climate risks, support public health and improve basic services. When integrated into urban planning, these interventions contribute to more stable, resilient and efficient urban systems.
Although NbS are gaining recognition in urban strategies, turning ideas into action remains a major challenge, and financing is cited as the biggest barrier. In fact, many city officials and urban practitioners struggle with a common question: How can nature‑based solutions be financed in ways that are sustainable, scalable and socially just? Addressing this challenge requires a fundamental shift in how NbS are planned, valued and integrated into urban investment frameworks.
1. Creating an enabling environment
Cities face limited budgets, and NbS often compete for funding with more traditional infrastructure projects - such as roads, drainage systems and buildings. These projects usually have clear financial models, while the benefits of NbS are spread across different sectors and may materialise only after several years.
Even financing mechanisms are typically built around short‑term, single‑sector projects, while nature offers long‑term, overlapping benefits. And because these interventions do not always generate direct revenue, cities find it harder to justify them through conventional cost‑benefit analysis.
Public‑procurement systems can further complicate processes. Procurement rules and procedures are often not designed for multi‑benefit projects or nature‑based approaches, which can hinder or delay implementation.
Unlocking greater financing for NbS requires action on multiple fronts. Financial institutions and governments must adapt existing frameworks to account for the full range of NbS co‑benefits. At the same time, cities must break down institutional silos so that departments responsible for environment, health, infrastructure and finance can jointly plan and implement nature‑based projects.
2. Embedding nature‑based solutions into urban planning and public budgets
When cities plan green infrastructure from the outset, it becomes easier to align financial strategies and political support. Integrating NbS into climate‑action and adaptation plans, infrastructure development and land‑use policies helps ensure they are part of high‑level decision‑making. This also improves coordination across departments and levels of government, which is crucial for unlocking public funding and attracting external sources.
Many financing mechanisms are still channelled through national governments and may not prioritise or reflect local needs. If cities can align their local plans with national frameworks, they will be better positioned to access such funding. At the same time, they should retain the authority to access funds directly and have a stronger role in national climate and biodiversity planning.
3. Building investment‑ready projects
To attract both public and private investment, cities must develop bankable NbS projects that are well designed and aligned with investor expectations. This goes beyond technical planning: it includes stakeholder engagement, risk assessment and valuation.
Smaller and medium‑sized cities, especially in countries with limited institutional capacity, often face greater barriers in preparing such proposals. Limited staff, technical resources and political influence make application processes - which are often complex and resource‑intensive - particularly challenging. Without simplified procedures and targeted support, these cities risk falling behind. Project‑preparation instruments can help bridge this gap by supporting feasibility studies, financial structuring and monitoring frameworks.
One practical resource for navigating this complex topic is ICLEI’s
Biodiversity Finance Handbook for Cities and Regions, developed under the INTERACT‑Bio project. The handbook outlines key steps for project development, presents commonly used financing instruments and provides a structured collection of resources, definitions and case studies. From project identification to implementation and monitoring, it offers seven key phases of the project‑development cycle and explains the necessary activities in each phase.
4. Exploring blended finance and partnerships
Blended finance, which combines public, private and philanthropic capital, is increasingly used to support sustainable urban projects. In the case of NbS, public funding can help de‑risk investments for private actors or support project components that do not generate direct revenue, such as community engagement or ecological restoration.
Additional financial mechanisms cities can explore include green bonds, impact‑investment funds and public‑private partnerships. For example, a city could issue a green bond to restore a degraded watershed that also supplies drinking water and protects against flooding, delivering both environmental and social benefits.
In other cities, civil‑society organisations and local communities have successfully co‑designed nature‑based interventions and secured external funding by demonstrating measurable improvements in well‑being and climate resilience.
What cities are already doing
NbS are more than environmental initiatives. They function as infrastructure, improve public health, enable climate adaptation and represent long‑term investments in sustainable urban development. Cities are already using them through innovation and collaboration, but financial systems have not evolved at the same pace. Urban practitioners need greater support to develop, finance and implement NbS. Bridging this gap requires governments and donors to fully recognise the broad benefits of NbS, including their contribution to public health, social equity and economic resilience.
Source: ICLEI
Image: Unsplash
