Stockholm (NordSIP) – The 16th Conference of the Parties (COP16) to the Convention on Biological Diversity (CBD) begins on 21 October 2024 in Cali, Colombia. The Phenix Capital Group’s latest Annual Institutional Impact Investor Survey shows signs of nature’s rapid ascent up the agenda in the run-up to COP16 and the growing realisation among investors of the dependence of roughly half of global GDP on natural capital.
The survey targeted institutional investors with a combined total of $22.2 billion invested in impact strategies. 83% of the respondents are from Europe, with a strong Dutch representation from institutions like ABN AMRO, MN, and Rabobank. 17% of the surveyed investors are based in the Americas. Overall, the peer group comprises pension funds, foundations, family offices, and funds-of-funds. The targeted Sustainable Development Goals (SDGs) vary according to the geographical location of the underlying investments. Investors focusing on emerging markets prioritise SDGs 1 (No Poverty) and 2 (No Hunger), whereas developed market allocations target SDGs 3 (Good Health and Well-being) and 7 (Affordable and Clean Energy).
This year Phenix Capital chose to focus on the rising interest in natural capital, with 68% of respondents stating that they are actively considering the theme. Most of these are in the early stages of determining the extent of their nature-related impact strategies, although those having already invested in land and forestry are finding that many of these holdings can qualify as nature-positive. Beyond food and agriculture, investors are exploring opportunities in food technology as well as the blue economy.
The principal obstacle facing impact investors seeking to expand into natural capital is the identification of genuinely investable opportunities. Biodiversity investing remains a nascent field, and especially problematic for impact investors seeking financial returns alongside any stated nature-positive outcomes. The Phenix Capital report includes interviews with some of the survey respondents.
Commenting on the challenge of integrating natural capital themes Vincent Triesschijn, Global Head of ESG and Sustainable Investing at ABN AMRO said: “We are passionate about natural capital, but in reality, putting a number or value on it is much harder, which means it is hard to integrate this into the portfolios. We estimate the negative impact on, for example, deforestation but that is not nearly enough. The industry still needs to come up with something workable, including realistic workable definitions. Biodiversity measurements is getting better and better and in theory should already be the next big thing in the financial industry, but it is still niche unfortunately.” For Triesschijn, the key to evaluating nature-related investment is to look at all the positive and negative elements at play to work out the net impact.
Phenix Capital highlight the difficulties faced by biodiversity or nature-themed impact funds when fund raising first vintages with no demonstrable track record in a broadly sluggish private equity market. The lack of maturity of the natural capital theme also raises impact washing concerns. Nevertheless, the survey does demonstrate that nature is climbing the impact agenda, and there are encouraging signs of growing demand from impact investors, which should encourage fund managers to work on expanding the range of investable vehicles.
