By Eva Hernández Herrero, Programme Head, Peatlands

Few ecosystems offer such a powerful combination of near-term climate resilience, long-term carbon storage, improved water quality and quantity, and flood and drought risk reduction as peatlands. They are not only climate and nature assets: they are working landscapes that underpin local livelihoods, social stability, and human wellbeing. But they are seriously overlooked, undervalued, and untapped.  

Many people talk about nature-based solutions and wonder how to make them bankable. Well, peatlands are about to get there, with just a little push.  

Financing European Peatlands – a new report by Landscape Finance Lab and WaterLANDS (which Wetlands International is a partner of) – provides a very good and timely reflection on the potential role of peatlands as an investable asset. 

That is exactly what the Peatland Breakthrough wants to do – to accelerate action and mobilize finance to keep peatlands of the world wet, healthy and storing carbon – and why this new paper is a great contribution to this movement. 

Let’s break the report down.  

What are peatlands? 

Peatlands form where waterlogged conditions slow the decomposition of organic matter, causing it to accumulate as ‘peat’ over thousands of years. Peatlands represent the largest terrestrial carbon store globally – holding more carbon in their soils than all the world’s forests combined. When drained and degraded, peatlands release this stored carbon – causing a ‘double whammy’ to climate efforts: 

1. We lose the peatlands’ ability to create and store carbon 
2. We add carbon (stored for centuries) to the atmosphere exacerbating climate change 

What are the benefits of restored peatlands? 

The impact of restoring European peatlands spans two main categories: 

1. Ecosystem service benefits: keeping carbon in the soil; reducing future carbon emissions; improved water quality; supporting biodiversity, etc.
2. Productive benefits: through paludiculture, wet grazing and horticulture 

Let’s  talk carbon 

Europe’s peatlands represent one of the continent’s most powerful – and most neglected – nature-based solutions. According to the authors, on a conservative basis, 1.1 million hectares of peatlands across eight key European sites are feasibly restorable over the next decade. This represents an area four times the size of Luxembourg or half the size of Slovenia. It would reduce emissions by over 300 MtCO₂e. This is equivalent to permanently removing 1.3 million cars from Europe’s roads.   

Let’s  talk water 

As Europe faces increased demand for water (including for industrial and technological uses, such as for cooling data centres) and reduced supply (through drier summers), as well as greater flood risk from extreme weather events, the water benefits of peatland restoration cannot be overstated. Restored peatlands directly: 

1. Improve water quality 
2. Lower flood risk 
3. Improve drought and wildfire resilience  
4. Reduce erosion 

Let’s  talk biodiversity 

Peatlands create habitats for specialized plants (such as sphagnum moss) and unique insects (such as dragonflies and rare moths). They also support birds, amphibians, and mammals that rely on boggy conditions for food and shelter. Some of these species cannot thrive in any other environments – they are endemic to peatlands, making their survival directly dependent on the health of the peatlands.  

Let’s  talk productive benefits  

Restored peatlands support productive land uses compatible with high water tables. They can provide supplementary income, rural economic resilience, and political acceptability, particularly on former agricultural peat soils. These come in the form of paludiculture and wet grazing. Unlike conventional agriculture on drained peat, these methods preserve peat carbon stocks and reduce emissions while enabling continued production. 

What will it take to transform  peatland finance?  

The economics of peatland restoration are not a barrier to private investment, with some peatland restoration already demonstrating investible economics today. Yet despite the strong fundamentals, private investment has remained elusive due to fragmented markets, small project sizes, and weak revenue certainty. 

But the new report – Financing European Peatlands – presents a clear path for transforming peatland restoration finance from grant-dependent, individual projects into a genuine, natural infrastructure-like asset class, unlocking billions in private capital and delivering climate mitigation, water security and nature recovery for decades to come. 

Meeting the restoration activity indicated implies a minimum capital requirement of over €2 billion in the next decade—well beyond what public grants and philanthropic funding are willing or able to provide. 

While public and philanthropic capital remain essential catalysts, they are too constrained — and often too short-term — to build a durable, self-sustaining market on their own. This report instead is targetted at institutional investors.  

The scale of Europe’s peatland restoration opportunity is vast, and only the deep, patient pools of capital stewarded by pension funds and insurers can ultimately finance it at the level required. For true scale, peatland restoration finance needs to eventually attract capital from institutional investors and their asset managers. Today, over tens of trillions of euros are invested on behalf of European pension and life insurance beneficiaries. This capital represents not only depth, but duration: liabilities often stretch decades, aligning naturally with long-lived real assets. Some institutional investors are already taking limited partner positions in Natural Capital-focused private equity funds. There are thought to be at least 30-40 such funds globally that are either already in-market or at fundraising stage. There is no public information on target returns across this family of funds, but it is reasonable to assume it is north of 8% p.a., in line with other impact and climate-first private equity strategies. 

The report therefore examines the conditions under which peatland restoration can meet the requirements of institutional investors, lenders, and asset managers.  

Restored peatlands can provide returns through difference markets that are at various levels of maturity: 

1. Bespoke bilateral arrangements – between a developer of benefits and an ‘off-taker’ of benefits such as a corporate, and which might conceivably cover several environmental benefits at once (e.g. carbon but also biodiversity, water quality and quantity, and so forth. In bespoke agreements, payment for benefits are not normally tradable nor exchangeable between buyers. Price is determined by negotiation and not observable to third parties. 
2. Voluntary markets – like carbon markets.  
3. Compliance-driven markets – such as the Carbon Emission Trading Scheme (ETS), Biodiversity Net Gain and nutrient neutrality. Developers of verified ‘credits’ can then trade these credits in a market where the prices are subject to market forces as well as by the quality of the market itself. 

What would a roadmap to a more  investable market for  peatland  restoration  look  like? 

The three market or system-level shifts that would unlock more private finance for peatland restoration are for: 

1. Revenue to be diversified and stabilised: This requires moving beyond reliance on short-term, voluntary carbon revenues. While carbon markets will remain important and can be improved, scaling private finance will depend on bringing water benefits — and eventually biodiversity outcomes — into more standardised, contractable frameworks that support long-term agreements.  
2. Aggregation mechanisms to mature: Responding to the scale and liquidity bottleneck requires the development of catchment-, landscape- or programme-level vehicles that bundle multiple projects, landowners and revenue streams into investable portfolios.  
3. The peatland restoration sector to transition decisively towards project-finance structures 

By diversifying and stabilising revenues across carbon, water, and biodiversity markets, aggregating projects into investible portfolios, and adopting project-finance structures familiar to infrastructure investors, Europe can unlock the billions in private capital needed for peatland restoration at scale. 

The report highlighted above is an example of the type of financial measures that need and could be taken globally to reach the ambitious global targets for peatlands defined by the Peatland Breakthrough.

Institutional investors interested in financing the Peatland Breakthrough are encouraged to contact us.