by Barclay Ballard, via Agri Investor (December 2025)

Once viewed as little more than green distractions, biodiversity investments now have growing regulatory and market support, even if greater understanding and awareness are needed.

Making the environmental case for enhancing biodiversity may be relatively straightforward, but until recently, the economic benefits were less clear-cut. Of late, however, the implications of biodiversity for investors have become more obvious.

A recent finding by AXA Investment Managers stated that more than 50 percent of global GDP is dependent on biodiversity. It’s no longer seen as a green distraction, but as an investment imperative. As Arif Saad, head of natural capital – farmland solutions at Van Lanschot Kempen Investment Management, says, “investors and policymakers now
recognize that capital flows into nature-positive solutions can deliver both financial and sustainability returns.”

The dual benefits that investing in biodiversity can deliver have undoubtedly seen greater amounts of capital flowing in its direction. Even so, the financial shortfall remains eye-wateringly large, with the UN Environment Programme estimating there to be a $700 billion annual biodiversity funding gap. The demand is undoubtedly there and now
regulations are catching up.

The direction of travel can be seen through legislation like the UK’s Biodiversity Net Gain (BNG) law, which was introduced by the Environment Act 2021. While the UK is frequently ranked among the bottom 10 percent of markets for biodiversity intactness, the new ruling, mandating a minimum 10 percent increase in biodiversity compared with
the pre-development state for projects over a certain size, is looking to change that.

In the words of Peter Bachmann, managing director for sustainable infrastructure at Gresham House, “the UK BNG legislation puts a value on nature.”

This value is being cemented by further regulatory developments in other markets, both mandatory and voluntary, such as the updated Global Reporting Initiative recommendations published last year. At the same time, the emergence of biodiversity credits represents a potential market-based mechanism for assessing the cost of nature restoration. Whether the public or private sectors prioritize biodiversity investment, the benefits of committing more capital to biodiversity are widespread.

“In truth, all sectors are affected by the current loss of biodiversity,” explains Claire Sanson, fund director of the Sienna Biodiversity Private Credit fund at Sienna IM.

Breadth and depth
The breadth of opportunities surrounding biodiversity investments is certainly helping the growth of the asset class. The OECD puts biodiversity finance at $78 billion-$91 billion annually and although this figure still needs to be increased significantly if global environmental targets are to be met, it already represents a broad spectrum of
initiatives.

The Kunming Biodiversity Fund is a prime example. In late 2025 it announced the endorsement of 22 projects across 34 countries, including developing a biodiversity knowledge management strategy in Papua New Guinea and enhancing forest management in Albania.

It’s not just the breadth of biodiversity investments that are attracting capital, however. Projects that do more than simply maintain the environmental status quo are also being pursued. The Revenues for Nature (R4N) project recently announced backing for seven investment models designed to unlock up to $200 million for nature restoration and conservation. Among them is an initiative to adapt Southeast Asia’s Rimba Collective model in the hope of protecting and restoring 550,000 hectares of forest while supporting 32,000 people in forest communities over 30 years.

Crucially, R4N’s projects are drawing on the support of public bodies like the UN Development Programme Biodiversity Finance Initiative and private funding from the likes of natural capital asset management firm Lestari Capital.

“Delivering verifiable and additional biodiversity benefits rarely involves just preserving existing habitat,” adds Nick Dilks, managing partner at Ecosystem Investment Partners (EIP), a real asset, private equity firm. “It requires restoring, maintaining and monitoring habitat to generate genuinely additional benefits. Because this process is hard, technical and capital-intensive, you’re starting to see private capital come in.”

Translating science to finance
Part of the reason why biodiversity still faces such a sizable investment gap is that the potential returns from investing in these sorts of assets, whether they are parcels of regenerative agricultural land or technology to improve the traceability of sustainable resources, are not necessarily obvious.

“Our challenge is to make the concept of biodiversity very practical,” Sanson adds. “This requires significant effort for each sector to understand what has an impact and how the
borrower can put itself on a trajectory to help mitigate biodiversity loss and ensure any projects are eligible for finance.”

GPs can play an important role in highlighting the practical, and financially rewarding, use cases around biodiversity investment. They have long operated in agri-financing, providing capital for sustainable farming transitions and forestry projects, and agri-focused private equity.

EIP closed its fifth fund earlier this year, expanding its investments in large-scale wetland, stream, water quality, biodiversity and habitat mitigation and restoration projects across the US. Similarly, EcoEnterprises Fund is another GP that has a long history in biodiversity and recently hit a $100 million close on its Fund IV.

These approaches allow investors to participate in nature-positive outcomes without direct land ownership. Even so, often the public sector remains involved in any biodiversity-focused project, providing added assurance for private backers and making sure sustainability remains as important as returns.

“Blended finance structures that combine concessional capital from public or philanthropic sources with private investment are helping de-risk projects and attract institutional capital, particularly in emerging markets or innovative biodiversity projects,” Saad says.

Global frameworks, such as the Taskforce on Nature-related Financial Disclosures, are adding greater transparency and standardization around nature-related risks and opportunities. As these frameworks gain traction, they are expected to draw more GPs into constructing strategies that meet institutional requirements for governance, reporting and measurable impact, making biodiversity not just investible, but scalable.

“GPs are uniquely positioned to create strategies from scratch and build investable products around biodiversity,” Bachmann says. “For example, we invest in habitat banks, a whole new infrastructure asset class. These are non-productive pieces of land transformed into woodland, wetlands and grassland that generate predictable cashflows and have the robust characteristics of infrastructure assets, as well as elements of private credit.”

Gresham House’s sector-specific biodiversity strategy is another example of how private capital and public initiatives are joining forces. Willis Towers Watson, a global insurance and advisory fi rm with over $150 billion in assets under management, is the cornerstone investor in the Gresham House Biodiversity Co-Invest LP strategy, which will invest in habitat banks to tackle biodiversity loss and ecosystem collapse in line with the UK government’s BNG metrics.

“In the UK, the market has become investable due to the Environment Act, which is currently the only compliance market piece of legislation covering biodiversity globally,” Ruth Murray, Gresham House’s investment director for sustainable infrastructure, says. “This legislation provides a ‘Holy Trinity’ for making nature markets function: it creates a compliance obligation, focuses on a single metric and enables scale by establishing demand.”