Funders / Investors
4. Managing Risks
Greenwashing — the over-claiming of environmental benefits — is an emerging risk in Europe’s forest-restoration investment space. Nature-based finance holds enormous promise: by restoring woodlands, investors can help sequester carbon, support biodiversity, and generate sustainable returns. But not all “forest restoration” delivers what it promises. For instance, Verra’s forest-offset programme came under scrutiny in 2023 when investigators argued that many of its avoided-deforestation credits were overestimated — raising questions about the true climate benefit. While such concerns do not undercut the entire nature-investment sector, they highlight why due diligence is essential. Savvy investors can still finance impactful projects — but only by demanding strong monitoring and validation, permanence and additionality, and avoiding ‘leakage’ of negative impacts to other sites.
Effective monitoring and validation are critical to proving that forest restoration projects achieve their intended environmental outcomes and provide assurance to external investors and stakeholders. With robust monitoring systems, you can track restoration progress, assess ecological impacts, and verify the additionality of your investment. This way you can ensure that the restoration efforts result in genuine, measurable benefits to biodiversity and carbon sequestration.
To demonstrate restoration projects have been successful, they must be compared to meaningful references. In our work, we have developed practical tools to support a strategy for maximising restoration outcomes, and guidance on how to design effective forest restoration monitoring plans to verify success (see our Guidelines for Measuring, Reporting, and Verification of Forest Restoration. These resources enable you to make informed investment decisions, ensuring that restoration projects are efficient, sustainable, and impactful.
4.1 Monitoring, Reporting, Verification
Measurement, Reporting, and Verification (MRV) is a structured approach designed to track progress, ensure accountability, and assess the impacts of interventions, and the basis for reporting in the UN-REDD+ programme. More recently, as governments and managers seek to address benefits of forest conservation beyond the carbon that can be stored within forests, the features relevant to MRV reporting have expanded to include multiple biodiversity and ecosystem services (BES) indicators.
4.2 Additionality and conditionality
For conservation funding to truly benefit nature, markets must encourage outcomes that wouldn’t happen without that support – this is called “additionality”. One common problem of market-based instruments is adverse selection. Because nature markets follow classical market logic, they incentivize participation by suppliers whose opportunity costs are low. For example, a farmer might stop farming land if selling biodiversity credits pays more. But if they were likely to stop farming anyway, the credit doesn’t lead to a real gain for nature. This can make voluntary markets look efficient compared to regulation-based approaches, but it risks funding projects that don’t actually create new ecological benefits.
4.3 Permanence and leakage
Two other issues are important to consider in relation to investments in nature markets, namely permanence and leakage. Permanence refers to the durability and longevity of the environmental benefits achieved by the investment in nature markets. This principle is important for impacts on all affected ecosystem services and is well known from the carbon market (Wunder et al., 2025). Permanence is a key issue in nature markets and biodiversity protection. Some impacts, like species extinction, can’t be undone, so it’s important to make sure conservation results last over time.