Private Finance for Nature-based Solutions in Developing Countries: A Study of Kenya with Perspectives from Costa Rica

The global climate finance gap is substantial. Despite the recognized potential of nature-based solutions (NbS) for climate action, they remain critically underfunded, with more than 80% of the estimated funding coming from public sources. This contrasts sharply with broader climate finance figures, where the majority comes from private sources. Although policymakers advocate for an increased role of the private sector in addressing policy challenges, the topic of private climate finance remains underexplored, especially in developing nations. This thesis examines the dynamics of private climate finance deployment for NbS in three empirical cases in Kenya, drawing on insights from Costa Rica’s Payment for Ecosystem Services programme and other NbS initiatives in the country. How are private climate finance and NbS conceptualised within the UNFCCC, and how are they, in turn, translated at the national level in Kenya and Costa Rica? How is private climate finance currently deployed for NbS? How do the roles and drivers of private climate finance shape NbS implementation? What are the barriers to and enablers of private climate finance for NbS? To what extent does private climate finance for NbS support the achievement of the Paris Agreement Goals and the broader transition toward sustainability? The empirical cases highlight the emergence of voluntary carbon markets as a dominant financing instrument for NbS. The study reveals the need for a more nuanced understanding of private climate finance flows, especially in terms of financing sources. The analysis suggests that examining the beneficiaries of the ecosystem services provided by the NbS helps clarify the roles and motivations of private actors, as well as their potential financial contributions. Costa Rica’s state-centred approach demonstrates that public climate finance can be effective in supporting NbS, but also highlights potential limitations in attracting private investment. At a broader level, the study reveals the various ways in which private actors engage with NbS.