In 2022, according to the International Monetary Fund, the world subsidized fossil fuels to the tune of $7 trillion — about 7 percent of global GDP.[i] It is a magnificent number: it fits in a viral LinkedIn post, it has anchored a thousand keynote slides, and it carries a clear moral charge. We are pouring trillions into the very thing destroying us, so surely redirecting even a sliver would transform the climate and nature agenda. I work in nature finance. I have put the slide up myself.
But if you open the number up, you would see that only about $1.3 trillion is what most people picture when they hear “subsidy” — money a government actually spends, or tax revenue it forgoes, to make fossil fuels cheaper. The remaining $5.7 trillion — more than four-fifths of the headline — is the IMF’s estimate of uncollected costs: undercharging for climate damage and local air pollution. No treasury wrote those checks; no budget line contains them. They are a counterfactual, monetized and stacked on top of the real subsidies until the two are indistinguishable. The IMF is transparent about the split. Almost no one who quotes the number repeats it.
The IMF’s 2024 update makes the point. The total still came to roughly $7.4 trillion — but the explicit, genuinely fiscal part had fallen by almost half, to around $725 billion, as the energy-price spike of 2022 unwound.[ii] The redirectable pot shrank by hundreds of billions; the headline barely moved. A number that can lose half of its only spendable component and stay the same size is not measuring a pot of money.
It is the central pathology of nature finance in miniature.
The Numbers Don’t Measure What You Think
The signature figure of biodiversity finance — the “$700 billion annual finance gap,” from the 2020 Financing Nature report by the Paulson Institute, The Nature Conservancy, and Cornell — is a careful piece of work whose caveats did not survive the retelling.[iii] The headline is the midpoint of a range: modeled needs ($722–967 billion) minus current spending ($124–143 billion). Look inside current spending and the largest single component, just over half, is domestic government budgets; add philanthropy, development assistance, and redirected harmful subsidies, and the “financing” in this financing gap is overwhelmingly public. It was never a description of an investable private market. That, however, is precisely what it has become. It has been repeated ad nauseam in pitch decks, keynotes, roundtable discussions, and policy papers arguing that private finance should fill the gap. Tellingly, the figure has never been formally updated. Its job was never to be measured or be an accurate representation of actionable inventions. It was to be quoted as number only.
And I can go on, take the World Economic Forum’s $44 trillion of economic value generation — over half of global GDP — “moderately or highly dependent on nature,” which sweeps the entire value added of any dependent sector into the total.[iv] A loose measure of exposure, routinely cited as value “at risk,” as if half the world economy would evaporate. Dependency is not loss. And what about the rest of the economy? There is no economy - no human existence - without nature, which renders the category “dependent” close to meaningless as a talking point in the firstplace.
The problem is not imprecision. It is category confusion. These numbers add together things that cannot be added: a subsidy and an unpriced externality, a government budget and a private return, a flow and a counterfactual. A finance minister cannot budget against a $700 billion gap; a pension fund cannot underwrite to it. They are framing devices mis-installed in the slot where decision inputs are supposed to go. Which is why I fear the frame has short-circuited the discussion. I believe it is impeding action rather than producing better investment or better regulation.
How a Public Number Became a Private Mandate
If the numbers are so unusable, why are they everywhere? Because they serve everyone who repeats them. For an NGO, a mega-number is a fundraising instrument; for a consultancy, a billable framing; for an asset manager, the market-sizing slide that justifies a new fund or the size of the investable universe. No bad faith is required, just an incentive structure that rewards a large, round, quotable figure. And the numbers did real work at the outset, giving biodiversity negotiators something to organize around.
The damage came from a specific appropriation, and it happens so fast it is easy to miss: the gap is enormous; the public purse cannot possibly close it; therefore private capital must be mobilized; therefore governments must “de-risk” private investment so the money flows. A figure that originally meant “this is how much the world collectively needs to spend “(under specific set of policy interventions, which btw I don’t agree with) was overwritten with a new meaning: “This is the size of the market.” The political economist Daniela Gabor calls the pattern the “Wall Street Consensus”, the state recast as a manufacturer of investable assets, its balance sheet a risk absorber of last resort.[v]
What the Wrong Number Costs
Welding the public-policy question and the private-finance question into a single conversation about “closing the gap” disables both.
Start with finance. The distance between promise and pipeline is not rhetorical. Of the roughly $220 billion the UN Environment Programme counts flowing to nature-based solutions each year, private finance accounts for about $23 billion, and falling, down from $35 billion a year earlier.[vi] And as I have told the good people at UNEP even that small number is in my view an large overestimate. The biodiversity-credit market billed as the next frontier has issued credits measured in millions, not billions[vii]. And market that has probably spent more money on conferences, consultants and white papers that actual credit retirements.
So, capital arrives expecting a $700 billion market and finds a thin pipeline. Either it chases the phantom - launching vehicles against a market-size slide, then quietly retreating - or it never engages, because the distance between promise and opportunity reads as unseriousness. And probably most importantly, whatever is billed as nature positive investment opportunities isn’t something that investors is able to allocate too within their narrowly defined asset allocation models and risk budgets. Either way, the real constraint goes unaddressed. It is not a shortage of capital but a shortage of investable propositions: structural, risk-priced, measurable, with credible monitoring and a plausible exit. And that is able to slot into current financial market infrastructure. Call it the investability gap. You cannot see a pipeline problem through a market-size lens.
Now policy: the greater loss. Once the organizing question becomes “how do we mobilize private finance,” everything governments could do themselves collapses into one auxiliary task: de-risking. An enormous toolkit falls into disuse: direct regulation; Financial market reform; ecological taxation; reform of the roughly $1.8 trillion a year in environmentally harmful subsidies[viii], the largest and cheapest fiscal lever available; nature standards across the roughly 12 percent of GDP that wealthy governments spend through procurement[ix]; liability rules that make destruction expensive. I could go on.
And the number does not merely describe the field, it scores it. What gets counted gets done, and the gap frame counts one thing: capital mobilized. It tells a government that a blended-finance facility launches, which produces a press release and a leverage multiple, is worth much more than a subsidy reform that might expand the investable universe ten times as much, but no number that can be reported as visibly closing “the gap”. The evidence on de-risking is sobering ODI found each public dollar of blended finance in the poorest countries mobilized roughly $0.37 of private capital[x], not the four or five dollars the “billions to trillions” story implied. It tells asset managers to size funds against the headline rather than the pipeline.
There is merit in addressing how we can unlock more capital via derisking and blended finance vehicles and initiatives. But it shouldn’t be the only tool in the toolbox.
Decouple the Two Conversations
The cure is separation, not severing the links between public policy and private finance, but refusing to run both conversations through a single number and a single organizing question. Two tracks, two sets of metrics, two accountabilities.
The public track asks: how do we shape the economy so that destroying nature stops paying and restoring it becomes viable? That is not a finance question only. Its metrics are ecological - ecosystem extent and condition, species trajectories, deforestation rates - with finance as an input line, not the headline. And it does not wait: no government needs the gap quantified to enforce a deforestation regulation or reform a subsidy. Quantification was never the precondition for action; it became the substitute for it.
The private track asks a more modest question: what is actually investable now, and what would expand that set? Setting aside sustainably managed timberland, a mature $123 billion asset class[xi], and debt-for-nature swaps, which are restructurings. The honest answer would be: its small: low-single-digit billions a year of novel, nature-specific deals. That number is not an embarrassment to hide behind a trillion-dollar headline. It is the correct starting point, because from it you can ask the real questions: what risk-return profile each investor class requires, what credible measurement costs per hectare, and what public action would convert a un-investable proposition into a profitable and investable one. BTW, other word have used the word un-bankable and bankable here. I hate that. Running everything into an idea that only if we can make nature investment look like greenfield windmill projects, we have solved all the worlds problems, many things will never be bankable. Timberland for one is a really bad fit for loan-based project finance organized by banks.
That last question is where the two tracks legitimately meet, and where the welded discourse got the leverage backwards. The pipeline is thin not because investors are timid but because most of nature’s value is still an externality: unpriced, and therefore absent from any cash flow an investor could underwrite. A standing forest in the Brazilian Cerrado supplies watershed regulation, carbon storage, and habitat, and earns its owner nothing for any of them; cleared for pasture, it pays. De-risking subsidizes the downside of an investment whose economics policy has left untouched. Pricing the value changes the economics. We at BTG Pactual have quite successfully leveraged this by developing removal carbon credits with significant nature, climate stabilizing co-benefits sold to some of the biggest companies in the world alongside regular forest products return drivers in our recently closed Reforestation Fund. A blowout success that closed at more than USD 1.2 billion[xii]. The biggest private capital-based fund ever raised focused exclusively on forest restoration and reforestation. Internalize more of nature’s value, and the pipeline grows itself.
What to Count Instead
If you make policy, report success in ecological outcomes, not dollars mobilized. Publish a national inventory of harmful subsidies that separates actual budget transfers from counterfactual valuations, so that reform cannot be achieved by reclassification. Treat measurement as a public good: the per-hectare cost of credible verification is the binding constraint on every nature market. And fix the plumbing of finance, require the big regulated capital pools to assess natural-capital risk and opportunity at the whole-fund level, not in asset-class boxes that were never designed to hold it. Free Idea: Could someone please copy the Project Drawdown idea and apply it to nature making a list of interventions and policy changes that would have the biggest actual impact on the state of nature.
If you work in private finance, as I do, disclose pipeline, not total addressable market. Publish what is investable at what ticket size, and size vehicles to that. Make measurement quality, additionality, and a credible exit gating criteria in underwriting, not appendix items. Retire the mega-numbers from the marketing deck before regulators retire them for you. And grab the ball and take risk when new investable opportunities arise as (hopefully) more nature values go from being externalities to payment streams.
Fields can retire their headline numbers; one already has. Official development assistance was long scored by counting loan disbursements at face value, as if they were grants, flattering lenders’ generosity; in 2019 the OECD’s donor committee replaced that headline with grant-equivalent accounting[xiii]. The old number had organized donor behavior for a generation. The community decided it measured the wrong thing, and changed it.
And if we want one big number after all, there is exactly one worth building: an honest total addressable market for private investment in nature, with a floor and a ceiling. The floor is what is bankable investable today. It’s small, and the only thing capital can act on. The ceiling is what the market could become once nature’s value is priced and the great pools of capital can see it whole. The number’s worth is the distance between them, because that distance is a map: every dollar up to the ceiling is a specific externality left unpriced, a specific rule left unwritten, a specific pool of capital left siloed. Build that, and the headline and the work would finally point the same way.
We have been counting a counterfactual and calling it a market. The task is not to summon a figure large enough to match our anxiety. It is to change the incentives that make destruction profitable. And for financial markets to build real instruments for the real, small, growing set of things that can honestly be financed.
Stop performing the size of the problem. Count what you can act on.
[i] Simon Black, Antung A. Liu, Ian Parry and Nate Vernon, “IMF Fossil Fuel Subsidies Data: 2023 Update,” IMF Working Paper WP/2023/169, International Monetary Fund, August 2023. Global fossil fuel subsidies totalled $7 trillion (7.1 percent of GDP) in 2022; explicit subsidies (undercharging for supply costs) were $1.3 trillion, about 18 percent of the total, with the remainder implicit subsidies from undercharging for environmental costs and forgone consumption taxes. https://www.imf.org/en/Publications/WP/Issues/2023/08/22/IMF-Fossil-Fuel-Subsidies-Data-2023-Update-537281
[ii] International Monetary Fund, “Underpriced and Overused: Fossil Fuel Subsidies Data – 2025 Update,” IMF Working Paper WP/2025/270, December 2025. Explicit (fiscal) subsidies were $725 billion (0.6 percent of GDP) in 2024, down from a peak of about $1.3–1.4 trillion in 2022; implicit subsidies were $6.7 trillion (5.8 percent of GDP). https://www.imf.org/en/publications/wp/issues/2025/12/20/underpriced-and-overused-fossil-fuel-subsidies-data-2025-update-572729
[iii] Andrew Deutz, Geoffrey M. Heal, Rose Niu, Eric Swanson, Terry Townshend, Zhu Li, Alejandro Delmar, Alqayam Meghji, Suresh A. Sethi and John Tobin-de la Puente, Financing Nature: Closing the Global Biodiversity Financing Gap (The Paulson Institute, The Nature Conservancy and the Cornell Atkinson Center for Sustainability, 2020). The report estimates annual biodiversity conservation needs at $722–967 billion against current flows of $124–143 billion in 2019, yielding a financing gap of $598–824 billion per year (midpoint circa $711 billion). https://www.paulsoninstitute.org/conservation/financing-nature-report/
[iv] World Economic Forum, in collaboration with PwC, Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy, New Nature Economy series (Geneva: World Economic Forum, January 2020). The report estimates that $44 trillion of economic value generation – over half of world GDP – is moderately or highly dependent on nature and its services. https://www.weforum.org/publications/nature-risk-rising-why-the-crisis-engulfing-nature-matters-for-business-and-the-economy/
[v] Daniela Gabor, “The Wall Street Consensus,” Development and Change 52, no. 3 (2021): 429–459. https://doi.org/10.1111/dech.12645
[vi] UN Environment Programme, State of Finance for Nature 2026: Nature in the Red – Powering the Trillion Dollar Nature Transition Economy (Nairobi: UNEP). In 2023, finance flows to nature-based solutions totalled about $220 billion, of which private finance contributed roughly $23 billion. The prior edition – UNEP, State of Finance for Nature 2023 – put private finance at about $35 billion in 2022. https://www.unep.org/resources/state-finance-nature-2026
[vii] On the scale of the voluntary biodiversity-credit market, see Pollination’s September 2024 analysis of voluntary biodiversity-credit transactions, which estimated cumulative sales at between USD 325,000 and USD 1.87 million; and OECD, Scaling Up Biodiversity-Positive Incentives (OECD Publishing, 2025), citing BloombergNEF’s estimate that less than USD 1 million of biodiversity credits had been purchased across schemes identified in 20 regions. https://www.oecd.org/en/publications/scaling-up-biodiversity-positive-incentives_19b859ce-en/full-report/biodiversity-credits_79628cd2.html
[viii] Doug Koplow and Ronald Steenblik, Protecting Nature by Reforming Environmentally Harmful Subsidies: The Role of Business (Earth Track, commissioned by The B Team and Business for Nature, February 2022). The study estimates environmentally harmful subsidies at at least USD 1.8 trillion a year, about 2 percent of global GDP; a 2024 update by the same authors raised the estimate to at least USD 2.6 trillion. https://www.businessfornature.org/news/subsidy-reform
[ix] OECD, Government at a Glance 2023 (OECD Publishing, 2023). Public procurement accounted for roughly 12–13 percent of GDP (12.9 percent in 2021) on average across OECD countries. https://www.oecd.org/en/topics/public-procurement.html
[x] Samantha Attridge and Lars Engen, Blended Finance in the Poorest Countries: The Need for a Better Approach (ODI, April 2019). Each USD 1 of public money invested through blended finance mobilised on average USD 0.75 of private finance across developing countries, falling to USD 0.37 in low-income countries. https://odi.org/en/publications/blended-finance-in-the-poorest-countries-the-need-for-a-better-approach/
[xi] Nuveen Natural Capital estimate, cited in “How Timberland, Agriculture Can Fit Into Asset Owner Portfolios,” Chief Investment Officer, September 2025. As of the second quarter of 2024, institutional capital invested in timberland globally was estimated at about USD 123 billion. https://www.ai-cio.com/news/how-timberland-agriculture-can-fit-into-asset-owner-portfolios/
[xii] BTG Pactual Timberland Investment Group, “BTG Pactual Timberland Investment Group Raises US$1.24 Billion for Largest Reforestation Fund to Date,” press release, 28 April 2026. The Latin American Reforestation Strategy closed at USD 1.24 billion in commitments, described by the firm as the largest reforestation and restoration fund closed to date. https://timberlandinvestmentgroup.com/btg-pactual-timberland-investment-group-raises-us1-24-billion-for-largest-reforestation-fund-to-date/
[xiii] OECD, “Modernising Official Development Assistance (ODA).” Beginning with 2018 flows and adopted as the standard in 2019, the OECD Development Assistance Committee replaced the net-flow (cash-basis) headline measure of ODA with a grant-equivalent methodology. https://www.oecd.org/en/topics/sub-issues/oda-standards/modernising-official-development-assistance-oda.html
Great piece Esben!
Very well written Esben!