New Research Examines the Finance Gap Facing UK Nature-Positive Start-ups

Robyn Owen and Amy Burnett
December 2025

A report published by CUSP researchers at Middlesex University’s Centre for Enterprise and Economic Development Research explores the role of small innovative businesses in addressing the UK’s £700 billion biodiversity funding gap to meet its biodiversity commitments.

The research, funded by NERC and Innovate UK, examines a significant challenge: whilst 99.9% of UK businesses are SMEs, they face systemic exclusion from nature-positive finance markets despite being important innovators in environmental measurement and restoration technologies.

The study distinguishes between two distinct categories of SMEs requiring fundamentally different financial support. Start-up innovators developing biodiversity measurement technologies—from eDNA testing to acoustic monitoring—require patient capital investment to overcome the expensive period between concept and commercialisation. Established SME adopters need accessible finance and measurement tools to implement environmental practices, yet face barriers including lack of knowledge, capacity constraints, and uncertainty about financial returns on green investments.

Addressing the measurement challenge

A core finding addresses a question that has concerned investors and policymakers: how do we reliably measure nature-positive impacts to enable investment decisions?

Drawing on 88 stakeholder interviews across the UK’s green innovation ecosystem—including 10 detailed case studies of ecological services start-ups—the research reveals that whilst climate metrics (carbon reduction) are well-established, this success has created what some respondents termed “carbon tunnel vision”. Biodiversity measurement remains fragmented despite frameworks like TNFD and the introduction of Biodiversity Net Gain requirements.

The research documents how innovative SMEs are developing eDNA and sensor technologies that go beyond habitat proxies to measure actual species presence and abundance. However, these solutions remain costly for sectors with tight margins, particularly farming, where affordability presents a significant barrier to adoption.

Drivers of market development

The research identifies two powerful but poorly coordinated drivers of change. Regulatory pressure cascades from mandatory reporting requirements affecting large corporations and financial institutions, creating supply chain demands that eventually reach SMEs. Simultaneously, green impact investors (business angels, seed VCs, accelerators) motivated by both financial returns and environmental commitments fund SME start-up technologies that enable the measurements larger investors require.

The evidence suggests these two forces operate in relative isolation, creating a fragmented finance escalator that struggles to support ventures through their development stages, presenting gaps in both SME start-up innovation and green business model implementation support.

Findings and recommendations

The report concludes with seven evidence-based recommendations. These include mandatory environmental reporting for all public funding programmes to align the finance escalator, focused R&D investment in accessible biodiversity measurement technologies, and subsidised pilot programmes to test measurement innovations across sectors.

The research also recommends holistic venture support connecting complementary services throughout development stages, a transparent green innovation finance roadmap coordinating government agencies, enhanced Enterprise Investment Scheme provisions with longer horizons, and targeted local authority funding to establish green innovation support hubs.

The study arrives at a notable moment of policy uncertainty, from delayed Biodiversity Net Gain implementation to withdrawn environmental investment pledges. It demonstrates that whilst UK SME green innovation has developed considerably since COP26, systematic barriers persist. The evidence suggests that early-stage ecological services innovators are developing the science-based measurements that financial markets require, yet struggle to secure the patient capital necessary for hardware development and market validation.

As the report observes, we cannot deliver a single comprehensive solution for nature measurement as we have for carbon, but incremental progress across multiple measurement approaches may offer a viable path forward. The question remains whether policy and finance will align sufficiently to support these innovations in developing comprehensive solutions.

The full report, case studies, and technical appendices are available at www.cusp.ac.uk/SME-Finbio

This research was conducted as part of the NERC and Innovate UK Integrated Finance and Biodiversity (IFB) programme, examining how to mobilise investment to address the UK’s contribution to global environmental challenges.

Further Reading