Compensation doesn't undo the damage.

>Builders would make a loss on projects that caused lots of environmental harm, so wouldn't build in the first place.

I doubt that. They would create companies for removing forrests and after they lost in court they would file bankruptcy.

The damage is done and the compensation is void. And even if they pay, money doesn't consume carbon dioxide.

A few hundred billion dollars (or euros) does buy a lot of CO2 scrubbing and environmental remediation though.

Though this would effectively mean only a few companies who can afford hundreds of billions in surety bonds can risk building anything big.

That would just mean you can't build because the risk is too high. "Okay, so you've built infrastructure that enabled tens of thousands of households to have electricity and heat. On the other hand, you've destroyed the habitat of some bird that had to move 400m to the east. Sorry, you shouldn't have built it, please pay 300mn euros to this NGO."

Nobody will dare to invest into anything.

This is how it's done in the third world. They do this in Turkiey a lot. First they build, then they pay a fine. Sometimes they have to knock down the entire building, or take 3-4 floors off, if they don't' offer to pay a fine big enough to the taste of the judge. Really, almost everywhere in the Balkans/Trayka/Middle-East runs this way.

Of course, real estate is the only profitable industry in Turkiye, environment, safety regulations, and human rights be damned.

or they just go bankrupt and continue under another legal entity ;)

Opens the door to bribing judges and corrupting the process.

Wasn't that door already open?