Transformative policy directions and governance reforms

Transformative adaptation is understood as a process that goes beyond incremental improvements and entails deeper shifts in economic, governance, and value systems that shape climate and biodiversity risks. Nature-based solutions (NbS) are considered a key component of transformative adaptation because they can simultaneously reduce disaster risk, enhance climate resilience, contribute to mitigation, and deliver co-benefits for biodiversity and social equity. Despite this potential, NbS remain underutilised and are often implemented as isolated projects rather than embedded within broader financial, regulatory, and governance frameworks. Existing evidence indicates that transformational adaptation remains limited across regions and sectors, constrained by entrenched power relations, misaligned policies, structural inequalities, and limited access to finance, knowledge, and enabling institutions. This deliverable examines transformative policy directions and governance reforms that support climate adaptation, with a focus on the role of Nature-based Solutions (NbS) in insurance and finance. It examines whether combining insurance mechanisms with nature restoration and protection represents a shift away from approaches focused primarily on post-disaster compensation towards models that finance risk reduction and embed ecological resilience within financial systems. The report also assesses whether these solutions have the potential to scale beyond niche applications and contribute to broader changes in how societies understand, manage, and govern climate and nature-related risks. The report is structured in two main parts. Section 1 provides a stocktaking of current policies, initiatives, and frameworks relevant to NbS in insurance and finance, with a primary focus on the European context. It reviews major reference points, including the Principles for Sustainable Insurance of the UN Environment Programme Finance Initiative, corporate social responsibility–oriented business coalitions, guidance from the European Insurance and Occupational Pensions Authority, climate- and nature-related disclosure frameworks, public involvement in hazard insurance, the IUCN Global Standard for NbS, green bond standards, the EU Taxonomy, emerging approaches such as nature credits, and the European Water Resilience Strategy. This stocktaking highlights growing recognition of NbS as instruments for risk reduction and resilience, while also revealing persistent gaps in regulatory alignment, incentives, and implementation capacity. Section 2 presents the results of a horizon-scanning exercise that identifies three emerging trends relevant to the uptake and scaling of nature-based insurance and investment solutions. The first trend concerns the growing recognition of financial protection against climate- and disaster-related losses as a public resilience goal, driven by widening protection gaps and increasing constraints on insurability. The second trend examines the conditions under which nature is increasingly framed as a bankable and potentially insurable asset, including the internalisation of nature-related risks in financial decision-making and the convergence of metrics, verification methods, and contractual tools. The third trend relates to the expanding role of subnational actors in designing and governing place-based adaptation and risk-reduction strategies, enabled by the democratisation of climate risk intelligence and the growth of specialised climate and resilience services. Overall, the report finds that while momentum is increasing around the integration of NbS into insurance and finance, many of the governance conditions required for transformative change remain only partially developed. Advancing NbS as a core pillar of climate adaptation will require coordinated reforms that align financial and regulatory frameworks with long-term risk reduction objectives, recognise nature as a critical asset for resilience, and ensure that benefits and responsibilities are distributed in a fair and inclusive manner. By identifying existing entry points as well as remaining barriers, this deliverable aims to support policymakers, insurers, investors, and practitioners in strengthening the role of NbS within climate adaptation strategies.