As biodiversity conservation, carbon markets, water security and climate change adaptation remain in vogue, Martin Berg discusses why natural capital is not just for environmentalists, but important too for investors and businesses seeking good returns and sustainable growth.

Regenerative agriculture and sustainable forestry can deliver commercial returns and offer a buffer against inflation, a conference in Luxembourg heard recently. 

As nature-based investing impacts the landscape of equity investing, Martin Berg (pictured), CEO at Climate Asset Management, discussed the benefits of investing in regenerative agriculture and sustainable forestry at the Association of the Luxembourg Fund Industry (ALFI) Private Assets Conference 2025 in Luxembourg this month, attended by WealthBriefing.

According to an online definition of regenerative agriculture, it is "a system of farming that focuses on restoring and improving the health of soil, biodiversity, and ecosystems, rather than merely sustaining them".

Founded in 2020 as a joint venture between HSBC Asset Management and Pollination, Climate Asset Management (CAM) aims to deliver institutional-grade, investable natural capital solutions, transforming nature into scalable investment strategies, it says.

“Investing in asset-backed regenerative agriculture and sustainable forestry across developed markets, aims to generate scalable commercial returns which have an important environmental impact,” Berg said at the conference. “Investing in agriculture also acts as an inflation hedge.” 

Although agriculture, forestry, and fishing collectively contribute 4.3 per cent to the global GDP, Berg said that the allocation of institutional resources to natural capital remains remarkably low, accounting for less than 0.1 per cent.

However, he believes that the market for natural capital will accelerate, attracting increasing institutional capital. Berg estimates that annual investments in sustainable agriculture will grow roughly tenfold to about $20 billion by 2030, while sustainable forestry will remain strong at roughly $11 billion. Carbon and biodiversity markets are also expected to increase twofold to about $7 to $13 billion by 2030. He also expects annual investment for enabling technology and services supporting natural capital improvements to grow to about $11billion while annual investment in infrastructure adjacent to natural capital could increase to about $25 billion.

Meanwhile, assets under management in alternative asset classes are forecast to double to $23 trillion by 2026 compared with $13 trillion in 2021. Limited partner demand for real assets also remains steady, despite the macro conditions. However, institutional investors still struggle to define where natural capital sits within their allocation pools, which limits overall investment capacity, with only a few investors having a standalone allocation for natural capital, Berg said.

Interest in regenerative agriculture and related types of food/resource production continue to capture attention against a background of concern about the loss of species, impact on soil from erosion, concerns about the use of human-made chemicals on the land, and other issues. This publication has looked at the area before, for example here, and here. As AI and nature-based investing impact equity investing, other investment managers are stepping up investment in food and farmland. Swiss private bank Union Bancaire Privée (UBP), for instance, has highlighted the positive effects of AI in the agriculture space. With the food system accounting for 30 per cent of greenhouse gas emissions and resources being scarce, Adrien Cambonie, portfolio manager of UBP’s Biodiversity Restoration strategy, stressed the importance of investing in precision agriculture, to produce more using fewer resources. (A counter to this point is that AI requires large amounts of electricity.)

Blended finance
Berg's views were echoed at the conference by Caroline Bouquet, investment director of natural capital for Paris-based asset manager Mirova, a subsidiary of Natixis Investment Managers, who said that nature has been over exploited for decades but natural capital investing is becoming increasingly recognised. “We need more resilient supply chains and increased commitment to carbon neutrality,” Bouquet said. She sees a lot of opportunities for sustainable investment projects in emerging markets which come with a higher risk, and emphasised the benefits of blended finance involving public-private partnerships.

Justin Sykes, managing director at Guernsey-headquartered impact investor Innovest Advisory also recently highlighted the importance of blended finance and its contribution to the climate transition.

According to a definition from the London School of Economics (source: LSE, Grantham Research Institute on Climate Change and the Environment, 30 November 2022), blended finance is "the strategic use of public sources of capital to attract private investment in developing countries. It entails blending public capital such as Official Development Assistance (ODA) or funding by development financiers with private capital." Public funds are usually offered on more attractive terms than the prevailing market conditions, and are used to de-risk investment projects to mobilise additional private capital.

However, Berg does not use blended finance strategies yet, saying “we need to make projects work without using public finance, otherwise the scale risks being limited.”

CAM has developed three investment vehicles focused on natural capital assets and nature-based carbon projects which allow investors different natural capital exposure. The first one is the “Natural Capital Strategy” which invests in asset-backed regenerative agriculture and sustainable forestry across developed markets. The second one is the “Nature Based Carbon Strategy,” a global project finance strategy focused on nature-based solutions that generate high-impact carbon credits. Third, there is the “Carbon Nature (Bespoke Vehicle),” developed with Apple under its Restore Fund, which aims to provide premium carbon removals, financial returns, and measurable impact through nature-based investments.

Projects
Berg cited several of their investment projects, including Project Paradise in Queensland, Australia, involving a sugar cane plantation converted into a regenerative macadamia orchard. It is one of the largest greenfield macadamia orchards in Australia, located near processing facilities and export channels. It also has access to reliable irrigation water from multiple sources – local scheme water and an on-farm aquifer.

Regenerative agriculture practices are used to enhance soil health and biodiversity. Berg highlighted the investment rationale of transitioning to regenerative management from sugar cane to high-value native macadamia nuts, offering the opportunity to restore soil and enhance biodiversity.

The second one is Project Olympic Rainforest in North America, involving 68,000 acres of timberland across Clallam and Jefferson counties on Washington State’s Olympic Peninsula. It is a temperate rainforest climate with some of the fastest timber growth rates in the US and low wildfire risk, providing long-term asset security. The project has executed long-term offtake carbon agreements with Meta and Microsoft for over 1 million tonnes of additional carbon removals over the next decade. The project also aims to generate income from sustainable timber harvests, carbon credits, conservation easements and other ecosystem services.

The third one is the Restore Africa Programme, involving agroforestry in Sub Saharan Africa. It includes a large land restoration programme across  three countries aiming at supporting smallholder farmers to implement sustainable land management and farmer managed natural regeneration. The institutional investment process maximises the chance of selecting projects with highest carbon and co-benefits outcomes, while mitigating the main project’s risks to secure investors reputation. It is also estimated that one million households are targeted for livelihood improvement.

Alastair Cooper at London-based Cibus Capital, a specialist investment advisory firm focused on sustainable food and agriculture, also recently talked with this news service about why it is important to make agriculture more sustainable and resource-efficient for both the planet and humans. “The catalyst is new technology which is offering new solutions around resource efficiency and sustainability. Large-scale farmland needs to revert to more organic and regenerative agriculture and use new tech to make up the slack in terms of production,” he said. See here.