Can Financial Tools Save Biodiversity? A New Review Says “Not So Fast”

The world is losing plants, animals, and ecosystems at an alarming rate, with several causes of this biodiversity decline including habitat loss, climate change, and overexploitation. However, reversing these trends will likely require substantial amounts of funding. Experts estimate the gap between what’s currently being spent on biodiversity protection and what’s actually needed is at least $700 billion per year. One popular idea for closing that gap is to use market-based tools to mitigate damage to biodiversity, including new ideas like ‘biodiversity credits’ that provide funding from private entities directly to areas where biodiversity is being conserved. But do these tools actually work?

A new review published in the journal Current Opinion in Environmental Sustainability takes a hard look at the evidence of how well market-based tools work to protect biodiversity. Pamela McElwee, RCEI Affiliate and Professor in the Department of Human Ecology at Rutgers University and author of the review, finds that the track record is mixed at best.

McElwee reviewed several past and current market-based conservation tools alongside reflections on the newest approach of biodiversity credits. Biodiversity credits are private investments that aim to produce positive biodiversity outcomes, such as corporations ‘buying’ a ‘credit’ (essentially providing funding with strings attached) for protection for endangered species or restoration of an ecosystem. These credits are gaining significant attention following the 2022 Kunming-Montreal Global Biodiversity Framework, which lent support for such privately-led efforts.

The review finds that most previous market-based tools have delivered only modest results and often fail to achieve their goal of stopping biodiversity loss.  Most importantly, communities — especially Indigenous peoples — are frequently left out of decision-making about financial and other programs that directly affect their livelihoods and their lands, where much of the world’s biodiversity resides.

“The lesson from decades of research is clear: the most successful conservation financing approaches aren’t just about getting prices right in markets — they’re about getting people’s participation right. Programs that involve local communities, respect their values, and provide fair compensation that fits with the community’s aspirations are far more likely to deliver real outcomes for nature and for people,” stated McElwee. 

This review argues that policymakers should be cautious about rushing toward the newest market tool without learning from past failures. It calls for greater community involvement, stronger government regulation and standards for credits, and openness to non-market approaches — including direct public funding and unconditional payments to communities that steward natural areas. Given the increasing pressures on and impacts of biodiversity loss, developing effective conservation strategies will require a better understanding of how market-based interventions function and how they can be improved to produce positive outcomes for nature.

You can read the full study here: https://doi.org/10.1016/j.cosust.2025.101557

This article was written with assistance from Artificial Intelligence, was reviewed and edited by Kenneth Tam, and was reviewed by Pamela McElwee, a co-author on the study.