Finance and the environment

Biodiversity, the American way to save wetlands and habitats

It's called mitigation banking: companies that, in order to build, buy environmental credits from banks

by Daniela Russo

10 February 2026

3' min read

Translated by AI

Versione italiana

Key points

Development and Sustainability
Mitigation banking the US numbers
An opportunity for local communities
Political and regulatory risk

3' min read

Translated by AI

Versione italiana

In 2025, the global mitigation banking market is already worth over USD 13 billion. By 2034 it could be close to 29 billion, with an average annual growth rate of more than 8 per cent. A trajectory that places regulated ecological offset among the most dynamic segments of environmental finance, driven by regulatory pressure on biodiversity, expanding infrastructure, and an increasingly urgent need to make economic development and ecosystem protection compatible.

According to the latest Custom Market Insights report, the main driver of this growth is the demand for environmental credits to compensate for the loss of wetlands, waterways and natural habitats, especially in the construction and mining sectors. This segment remains dominant, thanks to regulations such as the Clean Water Act and the Endangered Species Act, which in the US have turned biodiversity protection into a regulated market. What also makes the model attractive is the operational advantage for companies and administrations: faster permits, certain costs, environmental responsibilities transferred to specialised operators.

Development and Sustainability

Mitigation banking is a real environmental market that was born in the United States to balance economic development and nature conservation. When a company has to build an infrastructure (a road, a shopping centre, an industrial plant), inevitably damaging wetlands or protected habitats, it is obliged by law to compensate for the impact. Instead of directly restoring an equivalent area, it can buy credits from specialised banks that have already restored degraded ecosystems.

It involves investment: a private or public entity buys compromised land, restores it to its original natural state, and obtains credits certified by federal authorities. The credits are then sold to developers who need them. Among the most relevant features of the process is location: regulations require that impacts are compensated for within the same catchment area where they occur.

Mitigation banking the US numbers

This mechanism, as Gwen Busby, Head of Research and Strategy at Nuveen Natural Capital, explains, from 1995 to 2024 led to the creation of 2,414 mitigation banks for wetlands and waterways in the United States, with a 6% steady annual growth rate in the number of transactions between 2000 and 2024.

"Mitigation banking," Busby comments, "is providing much-needed entry points into the US ecosystem restoration markets, allowing investors to participate in nature-based solutions through a market framework geared towards regulatory compliance. Over the past three decades, federally regulated ecosystem restoration markets have developed and expanded in the US. By some estimates, stream, wetland and species habitat mitigation markets currently generate nearly $4 billion in annual revenues. These are derived from the sale of mitigation credits to offset the unavoidable impacts of development projects. Nuveen Natural Capital's stream and wetland restoration portfolio has permanently conserved and restored more than 34,900 acres as of 31 December 2024."

Ecosystem restoration in the United States is a well-established environmental market of significant size. In recent years, there has been growing interest in the development of market-based frameworks for restoration and biodiversity outside the US, "which may offer investment opportunities in the future. For the time being, the US is a mature market that deserves to be explored by investors in natural capital, both for environmental outcomes and portfolio benefits,' Busby adds.

An opportunity for local communities

The heart of this attractiveness lies in the very structure of the returns, which are deeply linked to the territory. "The financial return is realised through the sale of credits, and since regulations require that impacts are offset within the same catchment area, the demand, and therefore the value of credits, is directly dependent on the location of the bank, clarifies Busby.

Thus, prices tend to be higher in urban expansion areas, infrastructure corridors and industrial districts, such as mining or energy. This local embeddedness makes mitigation banking an atypical asset class: "Since demand for credit comes from real development, such as public infrastructure, construction, industry, and mining, there is no correlation with agricultural commodity prices or forestry markets, which instead influence traditional land returns. Local market dynamics further insulate returns from regional or national economic trends that influence traditional investments in natural capital,' Busby concludes.

Political and regulatory risk

This system is not immune to regulatory uncertainties. In the United States, changes in the interpretation of environmental regulations can reduce the demand for compensation. One example is the recent reinterpretation of the concept of 'navigable waters', which has narrowed the scope of protection of the Clean Water Act (Cwa), with potential impacts on future market growth. Policy changes at the federal level can, however, be mitigated by the fact that most states have the option of adopting stricter laws than the federal ones, according to Nuveen Natural Capital's expert.