Philanthropy provides about 0.8% of what's needed for natural climate solutions. The instinct is to scale that 100x. But philanthropy doesn't need to fund everything—it needs to participate in a system where different investors want different things.
Nathan Truitt's recent analysis of philanthropy's role in NCS funding surfaced a question worth answering: if there are such huge market opportunities in carbon, biodiversity, and ecosystem services, why do conservation projects need donations at all?
It's a fair question. Here's our answer—building on Nathan's points about why traditional funding fails.
why traditional funding models fail
As Nathan explains, most natural climate solutions (NCS) projects die on the vine. Not because they lack value—but because they don't fit traditional funding models.
| Funding Model | Why It Fails for NCS |
|---|---|
| Self-funding | Organizations working with communities and landowners rarely have capital to invest directly |
| Bank loans | They don't have assets to use as collateral |
| Equity/VC | Return expectations are too high for what nature can deliver |
That third one is the killer. Venture capital expects explosive returns—10x, 100x. Investors who buy equity stakes in unproven ventures need outsized upside to justify the risk.
But all NCS projects leverage photosynthesis. And photosynthesis is slow and predictable. There's no way to "disrupt" or "hack" it to juice returns. You can't 10x a forest.
This isn't a bug. It's a feature.
the return profile mismatch
The problem isn't that nature can't produce returns. Natural assets produce extraordinary value—131-766% natural cap rates based on ecosystem service flows. The problem is that these returns are slow, steady, and predictable.
VC hates slow, steady, and predictable. But you know who loves it?
- Real-asset investors (farmland, timberland, infrastructure)
- Yield seekers (pension funds, endowments)
- Fixed-income investors (seeking alternatives to bonds)
- Patient capital (family offices with generational horizons)
These investors aren't looking for explosive growth. They're looking for reliable yield from hard assets that produce real value over decades. That's exactly what natural assets offer.
The question isn't "how do we make nature produce VC returns?" It's "how do we connect nature to the capital that wants what nature produces?"
the two-payor system
The answer isn't a traditional capital stack with senior, mezzanine, and junior positions. It's a two-payor system—two types of investors operating in parallel, each getting what they want:
| Risk & Dependency Investors | Real-Asset & Income Investors |
|---|---|
| Fund VALUE | Finance COST |
| Pay premiums for risk reduction | Finance land acquisition |
| Get ecosystem service benefits | Get real asset as security |
| Don't have to own or manage land | Yield from certificates until entrust |
| Corporations, insurers, municipalities | PRI, family offices, real-asset funds |
Both earn returns as premiums flow in, proceeds flow out, and natural assets move from unensured → ensured → entrust.
risk & dependency investors (left side)
These are corporations, municipalities, insurers, and utilities who depend on ecosystem services and will pay to reduce their exposure:
- Water utilities paying for watershed protection
- Insurers reducing wildfire and flood claims
- Food companies securing pollination and soil health
- Municipalities funding climate adaptation
Their motivation: "If this ecosystem fails, it costs me more than ensuring it."
What they get: Access to mispriced, undervalued ecosystem service benefits—without having to own, manage, or steward land themselves.
real-asset & income investors (right side)
These are investors seeking yield from undervalued hard assets:
- PRI (Program Related Investments) from foundations
- Farmland and timberland funds
- Infrastructure investors
- Family offices seeking real-asset allocation
- Endowments with long time horizons
Their motivation: "This land is undervalued relative to its ecosystem service value."
What they get: The real asset acts as security until the natural asset reaches permanent protection (entrust). They finance the cost, earn yield, and when the policy matures, the land enters permanent protection.
where philanthropy fits
In this model, PRI and catalytic capital sit on the real-asset side—not as a "junior position" beneath others, but as patient capital that finances acquisition cost and gets land security in return.
This is different from traditional philanthropy:
| Traditional Philanthropy | Catalytic Participation |
|---|---|
| Funds 100% of project | Finances cost alongside other real-asset capital |
| Subsidizes operating costs | Gets real asset as security until entrust |
| Impact limited to grant size | Earns yield while enabling protection |
| One-time funding | Participates in ongoing proceeds flow |
The philanthropic capital isn't taking first-loss risk for others—it's participating in a system where it gets what it wants (impact, land security, eventual entrust) while others get what they want (risk reduction, yield, ecosystem access).
natural cap rates: more room than you think
The opportunity exists because natural assets are systematically mispriced. The natural cap rate—ecosystem service value divided by real asset cost—reveals the spread:
| Natural Asset | Value | Cost | Natural Cap Rate |
|---|---|---|---|
| Beaver Riparian | $6.1M | $798K | 766% |
| Highland Forest | $15M | $5.3M | 281% |
| Forested Wetland | $1.4M | $294K | 493% |
| Coastal Estuary | $709K | $540K | 131% |
These rates represent total value—the sum of economic value (ecosystem services, public goods) and financial value (income-generating uses). They're not returns that must be fully realized.
The model only requires a fraction of this value to convert to financial premiums. And here's where it gets interesting for budget-constrained funders:
adjustable time horizons
By adjusting the policy length, premiums can fit almost any budget:
| Time Horizon | Annual Premium | Use Case |
|---|---|---|
| 4.5 years | Higher | Urgent protection, catalytic capital |
| 15-20 years | Moderate | Standard institutional investment |
| 33 years | Lower | Patient capital, endowments |
| 60 years | Minimal | Generational/perpetual structures |
A municipality with a tight budget can ensure the same natural asset as a well-funded foundation—just over a longer time horizon. The total value is the same; the annual premium adjusts to fit.
This flexibility is why the model can work for almost anyone who benefits from ecosystem services.
natural assets: from unensured to entrust
The goal is a pathway that moves natural assets to permanent protection:
| State | Natural Asset Status |
|---|---|
| Unensured | At risk, no protection in place |
| Ensured | Protected, capital deployed, land as security |
| Entrust | Permanent protection secured |
The two-payor system gets natural assets from unensured to ensured. Premium flows from beneficiaries keep them ensured. And when the policy matures, the natural asset transfers to permanent protection—real-asset investors exit, and the land is secured forever.
what this means for philanthropy
If you're a foundation program officer or philanthropic advisor:
Stop asking: "How do we fund more NCS projects directly?"
Start asking: "How do we participate in systems where our capital gets what we want while enabling others to get what they want?"
The $1 trillion biodiversity funding gap won't be closed by philanthropy scaling 100x. It'll be closed by building systems where different investors—each with different motivations—can participate together.
Photosynthesis isn't a limitation. It's the engine that makes the whole system work.