Our Take: From Promise to Practice - How Targeted Grants Are Building Investment-Ready Conservation Finance Models

Across the United States, forests and watershed systems quietly sustain the foundations of daily life, anchoring water security, recreation economies, disaster risk reduction, carbon storage, and regional resilience. Historically, these public benefits have been financed through appropriations, philanthropy, and emergency response. As conditions on the ground intensify, it has become clear that these mechanisms alone are no longer sufficient. Investors, philanthropies, and policymakers have therefore turned to conservation finance with a central question: what would it take for private and blended capital to participate responsibly and at scale in forest management and source water protection?

The Innovative Finance for National Forests (IFNF) program offers one of the clearest real-world tests of that question. Between 2020 and 2025, IFNF funded multiple rounds of innovative finance projects, focused on wildfire preparedness, source water protection, recreation infrastructure, biomass utilization, and land management outcomes associated with National Forest System lands. Gordian Knot Strategies (GKS) served as a strategic advisor and thought partner to the U.S. Forest Service and the U.S. Endowment for Forestry and Communities throughout the program and later conducted an independent learning review to synthesize what has worked, why it has worked, and what this experience implies for the future of conservation finance.

A consistent pattern emerges from the portfolio of almost forty projects. Many of the opportunities supported through IFNF were investment-worthy from the outset. They identified credible value pathways through avoided wildfire loss, enhanced watershed reliability, recreation-linked revenue, or measurable ecosystem services. Yet despite strong underlying economics, most projects were not immediately investment-ready. This distinction between investment worthy and investment ready proved to be the central fault line across the portfolio.

In many cases, projects lacked confirmed revenue streams, bankable payor commitments, standardized data to translate ecological outcomes into financial terms, well-defined governance frameworks, or the institutional capacity required to execute complex transactions. GKS witnessed this readiness gap to be structural rather than conceptual. Private capital was not absent because markets were uninterested; it was absent because the conditions required to deploy it responsibly had yet to be built.

IFNF was designed precisely to bridge that gap. The program provided catalytic development grants to underwrite the high-risk, non-recoverable work that sits between concept and implementation. This included feasibility analysis, legal structuring, financial modeling, partnership development, and governance design. In doing so, IFNF absorbed development-stage risk that private investors and most philanthropies are unwilling or unable to shoulder. Some projects advanced from concept to investable transaction, while others generated valuable insight showing that certain models were not viable under prevailing conditions. Both outcomes represented success because each improved market intelligence and reduced future uncertainty.

Program learning deepened as successive IFNF grantee cohorts unfolded. Early rounds contained more experimental concepts, whereas later rounds demonstrated increasing emphasis on repeatable models and implementation readiness. This progression allowed the program to move from exploratory experimentation toward clearer signals of what implementation and scale actually require.

A geographically diverse portfolio allowed mechanisms to be tested under different jurisdictional, ecological, and institutional conditions, with a natural concentration in western states where wildfire preparedness, water quantity and quality, and management needs are most acute. Over time, the program became not merely a grant facility but a vehicle for institutional learning across partners, projects, and agencies.

A key enabler in this evolution was the TRARO® predictive analytical screening framework, developed and deployed by Gordian Knot Strategies to support the IFNF program. TRARO® assesses seven core determinants of investment readiness, ranging from clarity of problem definition and demonstrated practices to the presence of willing payors, community participation, measurable performance precision, credible partners, and policy alignment. Each element is scored, and the results roll up into a 60-point readiness assessment. This structure created something the field has long lacked: a common impact readiness language capable of comparing highly heterogeneous projects across geographies, sectors, and transaction types.

In doing so, TRARO didn’t just evaluate proposals; it functioned as a developmental roadmap. By surfacing the core ingredients of readiness, the framework helped applicants identify specific gaps in their models and provided a clear line of sight to what it takes to move from a promising idea to an investable solution. This gave mission-aligned but undercapitalized entrepreneurs a tangible structure for strengthening their proposals and helped level the playing field for those operating in emerging or under-resourced contexts.

The evidence showed that TRARO® functioned well as a predictive screen for projects considered for the IFNF program rather than a descriptive checklist. Projects with higher readiness scores moved more predictably toward execution, demonstrated stronger partnership growth, and were more capable of attracting blended or private capital. The single most predictive factor across the portfolio was the Payors element. Where payors were speculative or undefined, capital mobilization stalled. Where willing buyers or beneficiaries were identified, validated, and institutionally anchored, transaction structuring accelerated. Analysis of Cohort 2 showed that projects with confirmed payors leveraged significantly more execution capital than those relying on projected but unsecured demand.

Other elements mattered as well. Weaknesses in operational design, stakeholder co-creation, or enabling policy variables commonly re-emerged later as execution barriers. Over time, a functional readiness threshold began to appear, where projects scoring near or above the mid-forties (out of sixty) generally displayed materially higher commercial viability than those scoring significantly below that level.

While voluntary TRARO screening introduced an additional step for applicants, the framework ultimately served both funders and proponents. Applicants received element-level diagnostic feedback early in the competitive process, allowing them to refine proposals, strengthen partnerships, and clarify revenue logic before arriving at the award stage. This improved field capacity, pipeline quality, reduced implementation-phase risk, and fostered a culture of disciplined innovation rather than unchecked experimentation.

One awardee shared the following feedback to the IFNF team: “We used the TRARO platform to prepare a draft application for a national conservation finance grant program. As this was our first time engaging with conservation finance tools, the structured feedback was invaluable. The process required meaningful upfront work, but the resulting guidance was detailed, practical, and clear about both strengths and gaps. Using TRARO helped us refine the project, strengthen the application, and ultimately secure funding.”

Taken together, the IFNF experience demonstrates that development grants can play a catalytic and irreplaceable role in building the conditions under which private finance can participate responsibly. Rather than subsidizing outcomes alone, IFNF funded the institutional and structural work required to enable those outcomes to occur through market-relevant mechanisms. In practice, this meant that many projects entered the program as promising concepts and exited as clearer, more investable propositions, whether or not they immediately closed private capital. Where readiness was insufficient, the program created transparency rather than false optimism.

Perhaps most importantly, IFNF succeeded because it combined financial rigor with an innovation-friendly culture. Proponents were encouraged to test new approaches, learn openly, and acknowledge uncertainty. Instead of penalizing iteration, the program treated it as a natural characteristic of frontier markets. That balance is rare in public finance and should be preserved. The program’s design allowed multiple sectors to work together, aligning the interests of public agencies, nonprofits, communities, and capital providers around shared problems that none could solve alone.

For the broader conservation finance field, several clear implications emerge. Readiness screening should occur early, not retroactively. Development capital should be staged according to maturity, with feasibility, pilot, and scaling tracks clearly distinguished, and with institutional capacity building treated as equally important as project design. And where possible, structured incubator environments can help early-stage proponents build the capabilities needed to engage credibly with investors.

Ultimately, the IFNF program demonstrates that the greatest barrier to scaling finance for nature is not a lack of capital. It is the absence of investable structures and verified value frameworks. When targeted catalytic funding is directed toward building those prerequisites, the pathway to responsible private participation becomes far clearer. The IFNF program excelled here.

Conservation finance will not scale through enthusiasm alone. It will scale when public institutions, communities, and capital providers take the time to understand one another’s constraints and design accordingly. IFNF showed that this work is possible, and that when readiness is treated as a first-order investment, the distance between promise and practice begins to close.