With an estimated 55% of the world’s GDP (approximately USD $78 trillion) depending on nature, investing in nature is both an attractive opportunity and an economic necessity.
Mobilising Finance for Forests’ Learning, Convening and Influencing Platform (MFF LCIP) has published a paper analyzing the emergence and characteristics of nature-positive funds, and how these funds can serve investors looking to enter the market. MFF LCIP has compiled a comprehensive but non-exhaustive list of 169 nature-positive funds that have launched since 2004, drawing from the existing Partnerships for Forest’s ‘Financing Nature Database’ as well as desk-based research and key informant interviews. This research indicated an upward trend in the number of nature-positive funds launched per year, with the number of active funds increasing as the sector moves towards maturity.
Figure 1: Our analysis of funds launched between 2004-2023 shows a general upwards trend in number of funds launched per year, with a year-on-year growth in number of active nature-positive funds.
This upwards trend is promising, and reflects how nature-positive funds are becoming more attractive and helping to drive the maturation of the nature-positive market.
Investing through funds rather than directly through projects helps to spread risk across different developers, geographies, and revenue streams, thus supporting the entry of new investors into the nature-positive market. Investing in nature-positive funds instead of individual projects gives investors a vehicle, typically managed by sector experts, that can mitigate risks including project maturity, dynamic regulatory landscapes, E&S risk and impact monitoring. With their ability to provide projects with smaller ticket sizes, provide in-house specialist knowledge and deliver tailored capital structures to suit investors’ needs, dedicated nature-positive funds present an accessible solution for larger commercial and institutional investors.
For a more detailed overview and mapping of nature-positive funds, please consult the MFF LCIP’s latest knowledge product, ‘Nature-positive funds: A guide for investors’. The guide outlines the business case to invest and the key characteristics of nature-positive funds, trends within revenue models and at the capital allocator and fund level, and the challenges and solutions for investing in nature-positive funds in more detail. The guide also provides a non-exhaustive dataset of nature-positive funds. Due to MFF’s particular interest in protecting and restoring tropical forests, this dataset may be skewed towards funds investing in emerging markets; however, global and developed market funds are also included in our sample.
About Mobilising Finance for Forests (MFF)
Mobilising Finance for Forests (MFF) is a UK Government-funded blended finance investment program which aims to combat deforestation and other environmentally unsustainable land use practices that contribute to global climate change. With an initial €178 million (£150 million) commitment from the UK Government, MFF aims to catalyze €1 billion of private sector investment into forestry and sustainable land use projects.