1 IORA operates at the intersection of ecological science, climate policy, and finance. What specific financing gaps, such as early-stage project development costs, revenue uncertainty, or long payback periods, make blended finance particularly relevant for nature-based and ecosystem restoration initiatives?

One of the key ideas behind the founding of IORA was to bring in much-needed finance into nature-based climate action. Our experience sits at the heart of why blended finance is not just relevant but essential for nature-based and ecosystem restoration and climate resilience.

The financing gaps in this space are structural, not incidental – the gaps exist because of deep mismatches between how NbS works and how financial markets work. It is a mismatch that no single project can fix on its own.

At the earliest stage of a project, before it can even demonstrate its value, there are significant costs involved in establishing ecological and socio-economic baselines, conducting feasibility assessments, and beginning community engagement. These activities are prerequisites for any credible project, yet they generate no revenue and carry high uncertainty. For us, this has been one of our most acute challenges: securing the capital to simply be on the ground and do the foundational scientific work that underpins how our project performs downstream. Traditional investors have little appetite for this phase, and commercial lenders have no viable collateral to point to. We have always typically relied on grant funding for this stage of our projects.

Once past the development stage, financing for implementation is often an equal, if not an even bigger challenge. Nature-based projects, whether in the forestry, agriculture or water sector, all have long payback periods – building resilience does not follow along in a quarterly reporting cycle. Revenue streams, whether from carbon finance, biodiversity credits, or any other mechanisms of payment for ecosystem services, are often uncertain in volume, can be delayed and are dependent on volatile markets that lack the liquidity and price stability that conventional finance requires.

We have frequently had to bridge this gap through grant funding, which, while critical, is not a scalable or reliable foundation for the kind of systemic restoration the climate and biodiversity crises demand. Blended finance – being able to combine grants, public finance, investments, concessional capital and debt, alongside private investment – is ideal for addressing the finance gap in this sector.

2 When institutional or impact investors seek to evaluate a nature-based project for blended financing, what ecological baselines, MRV systems, or monitoring frameworks does IORA consider non-negotiable for investors? Has the availability or absence of such data ever been a decisive factor in whether a project could be financed?

For an investor, project credibility is key, and for nature-based projects, this rests on how robust the monitoring data systems are. Data is also essential in being able to develop and implement a high-quality project. For instance, a strong well-represented socio-economic and ecological baseline provides a project an understanding of not just the present conditions of a landscape, but also the challenges and needs of the communities there. This information then supports the development of the climate risk profile for a landscape, leading to the identification of interventions that are grounded in scientific information and local realities. Thus, a combination of the best available scientific information that is aligned with global frameworks and local knowledge is a non-negotiable for IORA when developing any NbS project.

Ecological baselines that we establish, while they will differ depending on the landscape, broadly include forest cover and quality, soil health, above- and below-ground carbon stock, floral and faunal biodiversity, water availability and quality, invasive species presences and an evaluation of ecosystem services such as pollination, nutrient cycling, water cycle, etc. These are established through a combination of remote sensing and on-ground data gathering.

Monitoring is equally important. Strong MRV systems are not just technical frameworks but what enable trust to build between those implementing projects and those financing them. Lack of robust MRV systems results in even the most promising projects struggling to attract capital, and many simply never get off the ground. With this in mind, IORA, with its long-standing partner Michigan State University, has developed a platform – IORA Nature Tech – that uses artificial intelligence, computer vision, and high-resolution satellite imagery to map and measure individual trees – from dense forests to scattered trees in a landscape. This enables precise carbon accounting, empowering communities, investors and policymakers to accurately and transparently track changes in their landscapes and make data-driven decisions.

We are now in conversations with multiple investors and carbon registries on deploying IORA Nature Tech's platform not just on IORAs landscape-level projects but also on identifying other opportunities that would benefit from a strong monitoring framework.

3 Nature-based projects are often perceived as high-risk by commercial financiers due to long payback periods, non-monetised co-benefits, and community dependencies. What de-risking instruments has IORA deployed or recommended to make these projects financeable, and how effective have they been in practice?

That is correct; NbS projects present multiple risks for commercial financiers, including non-permanence of interventions, long-term and uncertain returns, and the lack of standardised frameworks to assess co-benefits and adaptation impacts. Land-based projects are also exposed to natural uncertainties and depend heavily on the communities managing them.

In our landscape projects, risks and mitigation strategies are structured across three categories: Environmental, Social and Governance, and Financial and Market risks.

Environmental risks are addressed through strong baselines and climate-resilient design. In agroforestry projects, we prioritise mixed native species selected using local knowledge and future climate considerations, supported by spatial planning and standardised protocols. While extreme events such as floods or droughts cannot be fully mitigated, we focus on minimising impact through ongoing monitoring and strengthening ecosystem and community resilience.

Social and governance risks, particularly low community participation, are mitigated through participatory planning and sustained engagement. In Meghalaya, under the MegCare programme, extensive consultations have helped align interventions with local needs, ensuring stronger adoption. Land-related risks are managed through title verification and exclusion of disputed parcels, while partnerships with state governments through MoUs enhance credibility and policy alignment.

On the financial and market side, diversification is key. Projects go beyond carbon markets to improve productivity and strengthen market linkages, creating more stable income streams. Blended revenue models and milestone-based financing help improve accountability and manage risk effectively.

4 IORA has helped develop PES mechanisms in states like Himachal Pradesh and Assam and has assessed ecosystem service valuation frameworks for Uttarakhand. In your experience, what are the key challenges in converting ecosystem service valuations into operational payment mechanisms with identifiable buyers and sustainable revenue streams?

Payment for Ecosystem Services (PES) is often positioned as a bridge between ecology and economics and is a framework that is still finding its footing, with operationalisation constrained by both market and institutional gaps. The most advanced PES frame actually is the carbon market. Other ecosystem services, such as water regulation, biodiversity or even cultural services, being incentivised, are still in their nascent stage and do not yet have clearly defined buyers and only a few successful examples from different regions. In watershed systems, for instance, downstream beneficiaries, including urban users and industries, are often too numerous and dispersed to engage in structured payment mechanisms. Even where willingness to pay exists, translating it into institutionalised, long-term payment flows requires robust governance frameworks. Ensuring equitable benefit-sharing adds another layer of complexity.

Our experience suggests that PES mechanisms work best when anchored in scientific valuation, have strong policy backing, are supported by credible intermediaries, and are underpinned by clearly defined MRV systems that link payments directly to measurable outcomes. Without these, PES risks remaining conceptually compelling, but operationally elusive.

5 From IORA’s vantage point as both a policy advisor and project implementer, what institutional or market infrastructure, such as carbon registries, measurement frameworks, or risk mitigation tools, is still needed to unlock large-scale blended finance for nature in India?

There is growing interest in nature finance globally, though the infrastructure or MRV frameworks to support it are not always there. While carbon methodologies are advancing, there is still limited clarity on how to measure and monetise co-benefits such as biodiversity or water services in a way that is both consistent and investable. Additionally, often carbon methodologies are not adaptable or compatible with the realities of the global south or of working with smallholder farmers.

Policy clarity is another constraint. Questions around land tenure, carbon ownership, and benefit-sharing continue to shape how, and whether, projects move forward. This is particularly relevant in community-managed or forested landscapes. This can also lead to inequity on the ground, with not all projects having fair benefit sharing with landowners. We are working with the Ministry of Agriculture and Farmers Welfare to develop a framework that defines how land-based projects are managed and implemented, including guidance for benefit sharing.

On the market side, early movements are visible, and we have been able to demonstrate a blended finance model in our MegCare programme. We have implemented the project through a combination of grant-based funding for the project feasibility and pilot stages, followed by executing India’s first carbon-backed loan for early implementation. Here we have also leveraged public financing through multiple state government programmes for support with plantation, irrigation, etc. Now we are bringing in equity funding into the programme to implement at scale. The key to being able to execute this model has been project credibility, strong community and government partnership, equitable benefit sharing, robust MRV systems and transparency at all levels of the programme.

We believe that while this is a replicable model, financial instruments still remain misaligned with the realities of nature-based solutions, which typically involve longer timelines and higher uncertainty than traditional investments. Loans and debt funding require restructuring to align with the timelines of nature and not of financial years. Additionally, debt providers require guarantees, as the perceived risk of these projects is still very high, and securing these remains a major challenge.

Bridging these gaps will require more than incremental fixes. It will need coordinated action across policy, finance, and technology, alongside wider adoption of digital tools such as remote sensing and AI to improve transparency and reduce transaction costs. We believe tools like IORA Nature Tech’s Natsure.ai platform and the Banking On Nature Portal developed by IORA and Michigan State University can play a key role in this. The Banking On Nature Portal provides a platform to systematically design, finance, and scale high-quality NbS projects, positioning nature as a credible and investable asset. This portal aims to provide investors with the information on the importance of nature investing, benefits and co-benefits seen, reliable MRV frameworks and the tools to be able to design and identify credible projects, helping unlock finance from investors who at present may perceive the risk of NbS as too high.

6 Looking ahead, how do you see nature finance evolving in India over the next decade? Do you expect blended finance to remain primarily a catalyst for early-stage ecosystem restoration projects, or could it also help establish fully commercial markets for carbon, biodiversity, and ecosystem services?

Nature finance in India is at an inflection point. Over the next decade, we are likely to see a shift from project-driven and pilot interventions to more structured, scalable investment models that integrate carbon, water, biodiversity, and livelihoods within the same system.

Blended finance will continue to play a catalytic role, though not just in early-stage project development and in geographies with higher perceived risks, but also in ensuring project permanence. As data systems strengthen and market mechanisms evolve, more mature and commercially viable segments, especially in carbon and potentially biodiversity markets, along with value chain financing, are expected to emerge, expanding the blended finance portfolio with private investors playing a bigger role than they do at present.

Perhaps the more significant shift, however, will be conceptual. Nature is no longer being viewed solely as something to conserve but as a system that, if managed well, can generate sustained ecological and economic value, both for the communities and organisations that rely on it.

The challenge and opportunity lie in making that value visible, measurable, and investable.