Nature is not a free good. Southeast Asia’s investors must put a price on it

In a quiet corner of Australia’s Wet Tropics, a large native bird, called the cassowary, is becoming a catalyst for financial innovation. Reflecting a growing number of ways that nature finance is evolving globally—from blended finance, sustainable finance, green bonds and public private partnerships—Australia is pursuing an environmental market solution by launching a federal legislated nature repair market scheme as well as a voluntary Cassowary Credit Scheme administered by Eco-Markets Australia in one of the world’s first attempts to create verified biodiversity credits.

An innovative way to facilitate the transfer of private capital into nature positive projects, the Cassowary Credit Scheme enables investors, governments and corporates to pay landholders and land managers to restore critical rainforest habitat. Developed by Terrain NRM in partnership with Australia’s First Nations people and local land stewards, it is also one of the world’s first  voluntary biodiversity credit schemes to enable the verified stacking of these biodiversity credits with carbon credits.

This ‘stacking’ enables landholders to generate two separate tradable credits from the same parcel of land and provides an additional income stream to generate nature positive and carbon sequestration outcomes. In doing so, it offers an early, but powerful, signal of how natural capital could be valued—and financed—across Asia Pacific. For Southeast Asia in particular, the implications are profound.

Southeast Asian countries, including Indonesia, Vietnam, the Philippines, and Malaysia, are among the planet's most biodiverse. They are also among the most vulnerable to biodiversity loss given the extensive logging and clearing for agriculture, mining and urban development. Yet despite this clear exposure to nature risk, few governments or institutional investors in the region are exploring ways that they can turn their natural capital into a revenue-generating asset that can fund protection and regeneration. That must change.

Nature as an investible asset

At its core, the challenge is simple: nature needs to be valued in its own right. Water, forests, plants and animal species have long been treated as public goods—limitless, costless, and invisible on a balance sheet. But this illusion is beginning to crack. More than half of global GDP depends moderately or highly on functioning ecosystems, according to the World Economic Forum.

As the costs of nature loss become financial liabilities, markets must begin to integrate nature alongside carbon in how capital is deployed and how the risks of investment and business operations are assessed. Biodiversity markets need to be high integrity and have good governance, monitoring and measurement and verification systems in place to avoid additionality, leakage and prioritisation of profit over nature restoration.

Australia’s experience is instructive. A combination of government-backed pilot schemes, voluntary market innovations, natural capital funds and public partnership initiatives  has laid the foundations for a nature-positive economy.

Integrated nature and climate financial reporting will soon be a reality for companies as jurisdictions around the world legislate mandatory climate and sustainability disclosure laws (aligning with the Mandatory sustainability reporting International Financial Reporting Standards S1 and S2). These laws will require directors of companies to assess and publicly disclose their financial exposure to climate and sustainability risks and opportunities.  Such disclosure laws will help drive demand for high integrity biodiversity and carbon credit projects. 

A recent report from Australian law firm Clayton Utz, Building Biodiversity: Australian nature credit markets beyond the TNFD, explores the ways in which the TNFD frameworks have created a tipping point in the development of transparent and functional voluntary biodiversity credit markets that can finance nature positive gains. We can now learn from the early evolution of these markets and implement frameworks and regulations that can help them grow.

A Southeast Asian opportunity

Southeast Asia is uniquely placed to lead on natural capital market development. Its economies are increasingly services-led and export-dependent, its ecosystems—vast tropical peatlands, coastal mangroves, coral reefs, remnant rainforests—offer unparalleled biodiversity value, and its investors are becoming more sophisticated in terms of assessing risk and opportunity.

But while governments have made strong rhetorical commitments, including under the Kunming-Montreal Global Biodiversity Framework, the supporting infrastructure remains weak. Voluntary nature credit pilots are patchy. Regulatory clarity is missing. There is limited effort being made to provide the structures that enable financial markets to quantify biodiversity risk—or opportunity.

This is where Southeast Asian governments and investors must act. Waiting for perfect data or global mandates is not a strategy. The time for pilot biodiversity credit projects, blended finance structures, and cross-border nature capital funds is now. Public institutions can use seed capital to de-risk biodiversity investments through public private partnerships. Private banks and asset managers can build products that stack nature and carbon outcomes. And central banks can begin to explore how to integrate nature-related risks into the financial system through green bonds and blue bonds, just as they have for climate.

Why co-benefits matter

Carbon markets have taught the global economy a critical lesson: co-benefits such as biodiversity benefits and social benefits arising from indigenous employment opportunities, ecotourism and increased access to clean water can drive credibility and price premiums. Nature credits, when correctly structured, can be co-benefit rich and accelerate systemic ecosystem changes. They can deliver more sustainable land use with biodiversity restoration, food security, carbon reduction and adaptation, more access to clean water, and more equitable indigenous employment opportunities, all from a single investment.

For Southeast Asia, where land use, agriculture, and climate resilience intersect so closely, these integrated outcomes are a strategic advantage. The intangible benefits from nature investments such as improved stakeholder relationships with surrounding communities, increased social licence and enhance brand reputation should also not be underestimated.

The cassowary might seem like an unlikely finance pioneer. But its credit scheme, which requires  one unit of rainforest condition improvement for the generation of each cassowary credit, can be measured, verified and monetised, along with carbon projects, on the same land if the right frameworks exist. Southeast Asia’s decision is not whether to protect nature, but how to finance it. If we wait too long, the ecosystems which could give rise to thriving environmental markets may disappear.