At last month’s COP16 in Rome, leaders from more than 140 countries agreed to mobilize $200 billion per year to reverse losses from biological diversity, which the United Nations has called “our strongest natural defense against climate change.” The leaders, however, deferred to 2028 a decision to establish a new fund that would finance biodiversity projects.
More than $700 billion is needed annually to close the global biodiversity financing gap. Private fund managers are stepping up with new biodiversity funds, as institutional investor demand grows, especially in Europe, for nature-based conservation and restoration projects.
“In recent years, there has been a growing focus amongst investors to consider not just pure climate targets but also maintaining and improving biodiversity,” said Bram Bos of Goldman Sachs Asset Management, which is looking to raise up to $500 million for a fixed-income biodiversity impact fund over the next five years.
The Goldman Sachs Biodiversity Bond fund, domiciled in Luxembourg, will invest in bonds whose proceeds support new and existing biodiversity conservation and remediation projects, including sustainable management of living natural resources and land use and sustainable waste management. The fund will target corporate issuers of green, social and sustainability bonds, Goldman says, as defined by the International Capital Markets Association’s Green Bond Principles.
It will also invest in alignment with the European Commission’s taxonomy for sustainable activities, as well as Article 9 of the EU Sustainable Finance Disclosure Regulation (for background see, “The European Union is poised to scale back its ambitious climate finance regulations, too”).
Sustainability bonds
Goldman’s biodiversity bond fund, its fifth green bond fund, “seeks to provide fixed-income investors with exposure to issuers that are having a positive impact on biodiversity,” Bos said. At least 90% of the fund’s investments will be sustainable; around 10% or less will go to some investments that don’t meet sustainability requirements.
Goldman has set strict sustainability requirements for issuers, including based on how much of their revenues come from hard coal and/or oil fuel “exploration, extraction, distribution or refining.” The New York-based firm says it will restrict investments from companies involved in “controversial activities,” including the extraction and production of fossil fuels.
The fund aims to contribute to the United Nations’ Sustainable Developments goals, including clean water and sanitation (SDG6), life below water (SDG14) and life on land (SDG15).
Nature-based finance
Also in Europe this week, French impact investor Eurazeo secured a €300 million ($318.5 million) first close for its Planetary Boundaries Fund, which is investing in small and mid-sized companies addressing critical environmental challenges, such as pollution and biodiversity.
The impact buyout fund, which has a €750 million (about $796 million) target, received commitments from European financial institutions, insurance companies, asset managers and family offices. It is based on the Planetary Boundaries framework developed by Johan Rockström at the Stockholm Resilience Centre.
“We are witnessing significant momentum as investors recognize the need and opportunity to scale businesses providing solutions towards the environment,” said Eurazeo’s Sophie Flak.
Other biodiversity-focused vehicles in Europe include Rewilding Europe Capital, backed by European Investment Bank, which finances nature-based businesses working to restore the wild; Mirova’s Sustainable Land Use Fund, a €350 million target blended-finance fund that invests in decarbonizing forests and restoring degraded land; and Greensphere Capital’s nature-based impact venture fund, which is seeking £150 million ($193.2 million) to commercialize solutions to climate change and biodiversity.
