From bird insurance to blue bonds: China tests eight new ways to fund nature

UNDP’s Biodiversity Finance Initiative (BIOFIN) in China pilots market-based solutions, from migratory bird insurance to blue bonds, in Shanghai and Shandong provinces

A new wave of financial innovation is taking shape in China, where eight pioneering feasibility studies are moving from analysis to action, offering a practical roadmap to mobilize finance at scale for biodiversity conservation.

Developed by UNDP’s Biodiversity Finance Initiative (BIOFIN) in China, in collaboration with partners in Shanghai municipality and Shandong Province, the studies demonstrate how market-based instruments and public finance reforms can help close the global biodiversity finance gap.

At a dedicated validation workshop, Tracey Cumming, Senior Technical Advisor with the BIOFIN Global Team, endorsed the portfolio, noting that many of the studies are “of high quality and ready for implementation.”

Shanghai: Mobilizing private capital for urban biodiversity

In Shanghai, four feasibility studies explore how financial innovation can unlock private investment in biodiversity, particularly in complex urban and peri-urban ecosystems.

A migratory bird insurance scheme on Chongming Island, designed as an index-based product, would offer compensation to farmers based either on crop loss indicators or changes in bird populations. The mechanism aims to reduce human–wildlife conflict while securing critical stopover habitats.

A watershed biodiversity bond, a results-based instrument linked to Shanghai’s ecological watershed restoration programmes, would be designed to attract institutional investors into water ecosystem restoration.

A blended finance framework proposes a dedicated biodiversity fund structure, with a Green Peafowl loan or bond as a pilot transaction to test market appetite for biodiversity-focused financial products and crowded private capital.

A fourth study explores Natural Climate Solutions (NCS) and carbon–nature integration, identifying pathways to incorporate biodiversity into Shanghai’s carbon market. By linking carbon trading with nature-based outcomes, the approach could strengthen environmental integrity while expanding financing for ecosystems.

Shandong: Strengthening public finance and coastal protection

In Shandong Province, the focus shifts to optimizing public finances and scaling investment in coastal and marine ecosystems, which are critical assets for both biodiversity and local livelihoods.

A green budget tagging methodology has been developed to track biodiversity-related expenditures within government accounts. Designed for replication across provinces, the tool aims to improve transparency and efficiency in public spending.

Another study outlines a roadmap for payments for ecosystem services (PES), supporting a transition from traditional fiscal transfers toward more sustainable, performance-based financing mechanisms.

In partnership with the Agricultural Bank of China, BIOFIN China has also advanced a financing plan for nature-based solutions (NbS) infrastructure, targeting green investments that deliver both ecological and economic benefits.

Completing the portfolio is a feasibility study on blue bonds, specialized instruments designed to channel capital into coastal and marine ecosystem restoration.

From feasibility to implementation

Beyond the eight studies, BIOFIN China has initiated additional research on biodiversity risk assessment for financial institutions, including early-stage stress-testing frameworks. This work reflects a growing recognition of nature-related financial risks and the need to integrate them into financial decision-making.

With validation complete, the studies are now advancing toward implementation. Several instruments, including the migratory bird insurance scheme and carbon–nature market integration, are expected to enter pilot phases as early as 2026.

According to Leng Fei, National Coordinator of BIOFIN China, the portfolio highlights a critical lesson: closing the biodiversity finance gap requires both innovation and practical testing.

“By rigorously testing these instruments at the sub-national level, we are building the evidence base needed to accelerate implementation of the global biodiversity framework,” she said.

The next phase will be critical: turning these innovative mechanisms into real transactions that deliver measurable benefits for nature, communities, and economies alike.