Global forest and landscape degradation necessitates restoration to safeguard ecological processes and human well-being. Restoration is a crucial nature-based solution to climate change, although the scale of emission reductions remains uncertain. Despite numerous international commitments like the Bonn Challenge and the UN Decade on Ecosystem Restoration, progress has been slow, with land restoration lagging significantly behind targets. While previous research has focused on ecological aspects, spatial potential, social processes, and cost-benefit structures of restoration, there's been limited attention on the global factors needed to attract investment, particularly the critical role of finance. Public funding is insufficient, highlighting the need for private sector involvement. Asset managers increasingly seek sustainable investments, while corporations view restoration as a way to meet net-zero emission goals and enhance their brand image. However, private funding for restoration remains limited. This study investigates the gap between ambition and reality in restoration finance by exploring the perceptions of private financial actors and experts. The study focuses on asset managers and corporations, recognizing their differing objectives and approaches to restoration finance, to answer key questions: (1) what incentives do private actors have to finance restoration? (2) what restoration project types and regions align with these incentives? (3) what barriers do private actors face when financing restoration? and (4) how can these barriers be overcome?

The paper reviews existing literature on restoration, highlighting the insufficient progress towards global restoration targets despite significant commitments and pledges. It notes the limited focus on financial aspects, particularly the role of private finance, contrasting it with the growing interest from asset managers and corporations in sustainable investments and net-zero emission goals. The literature review emphasizes the scarcity of studies exploring the reasons for the persistent shortfall in restoration finance, despite growing interest from private actors. It establishes the context for the current study, which aims to fill this knowledge gap by investigating the perspectives of private financial actors and restoration finance experts.

This study employed a qualitative research design using semi-structured interviews to gather data. Thirty in-depth interviews were conducted with a diverse group of stakeholders including corporations, asset managers, NGOs, environmental consultants, a foundation, and an agroforestry initiative. A snowball sampling approach ensured saturation across key themes. The interview guide, developed through literature review and exploratory conversations, was adapted slightly for the three main groups: asset managers, corporations, and restoration finance experts. Interviews were conducted online and recorded (with permission). Data analysis was performed using NVivo software, employing inductive thematic analysis. This involved a six-step process: (1) familiarization with data, (2) generating initial codes, (3) searching for themes, (4) reviewing themes, (5) defining and naming themes, and (6) producing the report. Thematic analysis allowed for identification of recurring themes and patterns within the interview data. While the results are primarily presented separately for corporations and asset managers, overlaps and insights from other interview groups are integrated where relevant. The study acknowledges potential biases, including self-selection bias and social desirability bias, and attempts to mitigate these through anonymization, diverse sampling, and probing questions during interviews.

The study revealed distinct incentives and barriers for corporations and asset managers in financing restoration. For corporations, three main incentives emerged: (1) mitigating climate change and meeting net-emission-reduction commitments; (2) enhancing supply chain sustainability; and (3) leveraging impact and sustainability branding. These often overlap, with agroforestry frequently serving multiple purposes. However, barriers included a lack of knowledge about emission reductions from different restoration interventions and a lack of quantification systems for associated biodiversity and well-being benefits. Corporate focus on carbon could crowd out other ecological and social objectives. For supply chain sustainability, challenges included internalizing public goods benefits, high upfront costs, and the risk of farmers switching buyers. For branding, a lack of storytelling potential hindered projects like natural regeneration. For asset managers, the primary driver is Return on Investment (ROI). While sustainability and risk hedging (e.g., from stranded assets) provide incentives, the long timeframe and illiquidity of restoration, coupled with predominantly public goods benefits, pose significant barriers. The lack of bankable projects, standardization, and knowledge about restoration effectiveness further increases perceived risk. Weak institutions and governance in the Global South add complexity. Both corporations and asset managers show limited interest in natural regeneration projects. Both tend to favor projects in lower risk areas, with corporate projects tending to focus on areas with business presence.

The findings highlight that while market mechanisms can finance restoration, they currently fall short of the scale needed to meet global targets. Existing policy frameworks favor other types of investments, and private actors aren't sufficiently accountable for environmental harm. The study suggests that market mechanisms alone are insufficient; stronger policy mandates are essential. Corporations find business incentives in agroforestry, regenerative agriculture, and active restoration for emission reductions and branding, especially where a clear business case and presence exist. However, asset managers primarily focus on ROI, perceiving restoration as high-risk with low returns. A lack of knowledge about both restoration and finance creates a capability gap hindering scaled investments. Restoration competes with established asset classes like renewable energy with clearer market value. The discussion emphasizes the need for public and civil society intervention to improve the investment landscape for restoration.

Increased private sector engagement is crucial for scaling up global restoration efforts. This study identified the barriers hindering greater private investment despite growing interest. Corporations find incentives in various approaches, but asset managers primarily focus on ROI. Three key areas of public intervention are recommended: 1) Expanding markets and quantification systems for restoration benefits to incentivize projects beyond conventional economic models, while ensuring social and ecological safeguards; 2) Developing green finance instruments and utilizing public finance to share risks, increase investment size, and provide liquidity; 3) Implementing regulations and subsidies for restoration investments to provide long-term certainty and encourage sustainable practices. These interventions, combined, can facilitate greater private finance for equitable and ecologically sound restoration.

The study acknowledges potential biases, including self-selection bias in participant selection and social desirability bias in responses. The sample may not fully represent all private financial actors, especially those with no interest in restoration. The qualitative nature of the data limits the generalizability of the findings to a broader quantitative context. The study mainly focuses on the perspectives of interviewed actors, and may not encompass the full range of opinions within these groups.