Key Innovations in Financing Nature-Based Solutions for Coastal Adaptation

Abstract

The implementation of nature-based solutions (NBSs) for coastal adaptation to climate change is limited by a well-documented lack of finance. Scholars agree that financial innovation represents a solution to this problem, particularly due to its potential for mobilising private investments. It remains unclear however how exactly innovative solutions address the specific barriers found in NBS implementation and, given the distinctive local characteristics of NBSs, to what extent successful innovations can be replicated in other locations. This study addresses this issue by reviewing the literature and case studies of innovative financial solutions currently implemented in NBS projects, highlighting which financial barriers these arrangements address and which contextual conditions affect their applicability. We find that there is no “low-hanging fruit” in upscaling finance in NBSs through financial innovation. Innovative solutions are nevertheless expected to become more accessible with the increase in NBS project sizes, the increased availability of data on NBS performance, and the establishment of supportive policy frameworks. The flow of finance into NBS projects can be further enhanced through the external support of both public (de-risking and regulation) and private actors (financial expertise).