Why Global Climate Finance Rarely Reaches Small-Scale Nature-Based Enterprises

Barbara Quophy

MPRA Paper from University Library of Munich, Germany

Abstract: Global climate finance flows have expanded rapidly in recent years, yet access remains uneven across actors involved in implementing nature-based solutions (NbS). Small-scale and locally embedded enterprises play a critical role in delivering NbS, generating employment, and supporting climate adaptation and ecosystem restoration at the community level. However, these actors continue to face structural barriers to accessing international climate finance. This paper examines why global climate finance mechanisms frequently fail to reach small-scale nature-based enterprises. Drawing on a synthesis of existing literature, development reports, and policy analysis, the paper identifies key constraints related to scale and compliance requirements, misaligned financial instruments, informality and lack of institutional recognition, and intermediary practices that favor large-scale projects. The analysis highlights how current financing frameworks undervalue the social, environmental, and decent work co-benefits generated by small-scale NbS enterprises. The paper concludes by outlining practical policy implications for governments, multilateral agencies, donors, and financial intermediaries, emphasizing the need for proportionate compliance frameworks, targeted technical assistance, and financing instruments aligned with local implementation realities. Addressing these gaps is essential to ensure that climate finance supports inclusive, locally rooted, and employment-generating nature-based solutions.

Keywords: Climate Finance; Nature-Based Solutions; Small and Medium Enterprises; Decent Work; Sustainable Development; Inclusive Finance (search for similar items in EconPapers)
JEL-codes: Q54 (search for similar items in EconPapers)
Date: 2026-02
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