The event was presented by City Developments, the Taskforce on Nature-related Financial Disclosures, SGX and the Singapore Sustainable Finance Association.
Annually, the world requires US$900 billion ($1.15 billion) in investment in nature-based solutions. However, only US$200 billion, mostly coming from public sources, is available, leaving a US$700 billion shortfall.
There are three reasons for the funding gap, according to Menon. Firstly, the absence of putting a price on nature. “The carbon sequestered by a mangrove forest, the flood protection it provides to a coastal village, the nursery habitat it offers to fisheries worth billions — none of these appears on any balance sheet,” says Menon, an economist by training.
“They are what economists call externalities: real value, delivered to real people, but captured by nobody.”
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Another factor hindering investment is the difficulty of measuring and quantifying the outcomes of nature-based projects, given their complexity and variability. Menon asks: “How much carbon does a particular mangrove stand sequester? What happens to emissions if the restored forest is disturbed 10 years from now?
“High-profile failures in the voluntary carbon market — where several major forest conservation projects were found to have vastly over-credited their carbon outcomes — have damaged confidence in nature-based carbon credits.”
Menon believes that the lack of bankability of most nature projects is also leading to underinvestment. “Most nature projects, as currently structured, struggle to attract private capital,” he says.
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Menon explains that “complex” governance involving multiple stakeholders, “thin” revenue models with long-duration returns, and relatively high transaction costs — for due diligence, structuring, legal work and impact verification — relative to project size make these projects unappealing.
He says, “There is capital looking for nature projects. There are nature projects that need capital. But the projects are not structured in a way that connects the two.
“The result is a classic market failure.”
The business case for nature-based investment
According to a report by PwC’s global Centre for Nature Positive Business, more than half of the world’s GDP, or US$58 trillion, is moderately or highly dependent on nature. Sectors that are closely intertwined with nature include agriculture, F&B, tourism, construction, pharmaceuticals, and data centres, which require reliable water systems, fertile soils, and predictable climatic conditions to function effectively.
For Menon, human activity is degrading natural systems such as forests, oceans, mangroves, peatlands, and other ecosystems that absorb more than half of human-caused carbon emissions and mitigate climate change. “This is pertinent to Southeast Asia, where protecting and restoring just two ecosystems, peatlands and mangroves, can mitigate about half of the region’s land use carbon emissions.”
He believes nature-based solutions can help societies adapt to a warmer, more volatile world as the impacts of climate change intensify. He adds: “These interventions are important in Asia, where many of the world’s most climate-vulnerable populations live — in coastal cities, delta regions, and heat-stressed urban centres. Nature is foundational to humanity.”
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Can carbon markets make money?
The way Menon sees it, carbon markets can monetise conservation and restoration into recurring revenue, offering a means to narrow the financing gap faced by nature projects.
He is bullish on nature-based carbon credits because their scalability and cost-effectiveness make them appealing to sovereign buyers seeking to meet their national climate targets and to companies seeking to offset residual emissions on the path to net zero.
MSCI estimates that the market for nature-based carbon credits could be worth at least US$5 billion in 2030 and up to US$200 billion by 2050. Meanwhile, Southeast Asia holds 30% of the world’s potential in nature-based solutions — notably in Indonesia, Cambodia, Malaysia and the Philippines.
Three strategies for a vibrant carbon credit market
To tap the potential, Menon suggests three strategies as Singapore works to develop a “vibrant” nature-based carbon credit market in Asia.
The first strategy involves getting environmental integrity “right” by strengthening carbon credit integrity frameworks and investing in high-quality monitoring, reporting, and verification (MRV) solutions.
The Core Carbon Principles established by the Integrity Council for Voluntary Carbon Markets in 2023 have set rigorous quality thresholds for high-integrity carbon credits, including those for nature, says Menon, who urges standard-setters and crediting programmes to continue updating methodologies to keep pace with advances in remote sensing and carbon accounting.
On high-quality solutions, Menon highlights initiatives by national bodies, including the National Research Foundation, the National Space Agency, and the Economic Development Board, to strengthen the measurement of nature-based carbon projects.
The second strategy involves unlocking demand for nature-based credits. To this end, Menon cites the role of buyer coalitions and offtake agreements in signalling demand. The former aggregates demand, provides project developers with forward-revenue certainty and reduces reputational risk for individual buyers. The latter are especially useful for early-stage projects as they turn uncertain future credit sales into bankable cash flow.
Coalitions established include the Symbiosis Coalition and the industry-led Action for a Resilient Climate Coalition. The former has a 20-million-tonne advance market commitment to invest in nature-based carbon removal projects, while the latter aims to procure at least 10 million tonnes of carbon credits by 2030.
Singapore is also spearheading demand in the nature-based credits market, including contracting nature-based credits worth $76 million across four projects in Ghana, Peru, and Paraguay. The city-state is working with other like-minded governments to stimulate demand for high-quality forest conservation credits through the Forest and Climate Leaders’ Partnership Jurisdictional REDD+ Coalition. This coalition aims to mobilise US$3 billion to US$6 billion a year by 2030 to protect tropical forests through carbon markets and results-based payments.
Menon also urges corporates to be more confident in the market and set high standards for buying nature credits. “I understand companies’ reticence after the reputational damage of recent years,” says Menon. “But the answer to a flawed market is not exit — it is reform and higher standards.”
By mentioning the International Coalition to Grow Carbon Markets, which Singapore co-chairs, Menon is presumably suggesting that companies be guided by the coalition’s principles for using high‑integrity carbon credits, which was founded in June 2025 to strengthen voluntary demand for carbon credits.
The third strategy suggested by Menon requires catalysing the supply side of the equation, “The most critical bottleneck in nature financing is not the absence of willing investors,” says Menon. “It is the absence of investment-ready projects.”
Due to gaps in climate-risk data, technical capacity and bankable project design, project proposals from potential nature project developers are often rejected, presumably by potential financiers. To overcome this issue, multilateral development banks, philanthropies, and foundations step in to provide resources for feasibility analysis, project structuring, and impact frameworks. “It is unglamorous work, but it is the foundation on which supply rests.”
To further grow supply, Menon suggests scaling blended finance for nature-based solutions. Blended finance involves governments and other providers of concessional capital to use grants, guarantees, and first-loss instruments to de-risk nature investments and crowd in private capital.
Current blended platforms in Asia include Financing Asia’s Transition Partnership (FAST-P) and the Asian Development Bank’s (ADB) Nature Solutions Finance Hub. FAST-P aims to mobilise up to US$5 billion, backed by a US$500 million grant commitment from the Singapore government. The Green Investments Partnership, an initiative under FAST-P, has achieved its second close, bringing total commitments to US$800 million as of May 20.
Meanwhile, the ADB platform aims to mobilise at least US$2 billion in private finance for nature projects across Asia and the Pacific.
Financing what works
For Menon, nature-based solutions are critical to managing food and water security, decarbonisation and resilience to climate change.
“The depletion of the world’s natural capital demands our urgent attention and action,” says Menon, who reiterates the case for a vibrant nature-based carbon credit market (that could put a price on nature and create structural tailwinds for nature-based carbon credits).
“So let us protect what remains, restore what has been degraded, and finance what works.”
