Biodiversity has moved to the top of the agenda for institutional investors in recent years. Various studies warn that the loss of ecosystems is not just an ecological issue, but also has dire economic consequences. Soil depletion, water stress and deforestation can disrupt supply chains and, in turn, affect financial markets.
At the same time, only USD 220 billion is invested globally in restoring nature, while USD 7.3 trillion flows into activities that damage it. Private financing is clearly lagging behind, which makes the investment gap even bigger. Many pension funds are exploring how they can fit biodiversity into their investment policies, a few are already taking concrete steps. In practice, however, the focus is still mainly on mitigating nature-related risks and limiting environmental damage.
Nierop: “This is about the ‘do no harm’ principle. You set a baseline in your portfolio, regardless of the investment. That’s a good thing, but if you really want to make a positive impact, you also need to finance actual solutions. Simply integrating the theme into your portfolio to limit damage is not enough.”
Land use as a key
For Triodos Investment Management, the search for a concrete investment model quickly led to land use, according to Nierop. “Over 70% of all land use in Europe and North America is related to agriculture and forestry,” he says. “These are also the sectors that contribute most to biodiversity loss. At the same time, there are ways for agricultural and forestry businesses to have a positive impact on nature.”
That’s why Nierop wants to invest in the transition of agriculture and forestry towards regenerative, organic practices. This is about more than restoring nature alone. Nierop: “The focus is on biodiversity, but in the end it’s about transitioning to more sustainable land use. We want to help build farms and forests that are future-fit and can still generate yields 20 years from now.”
For Triodos Investment Management, the potential for impact and returns is strong enough to take the next step. In 2026, together with Canadian partner Fondaction, it will launch a biodiversity fund focused on these real assets. The fund will be active in developed markets in North America and Europe.
Five return drivers
A key challenge is the return: can biodiversity investments deliver both financial returns and positive impact on nature? According to Nierop, they can – as long as biodiversity is linked to economic activities.
Regenerative forestry and agriculture have economic advantages, Nierop argues. A major driver is the reduced need for inputs like pesticides and water. Truly sustainable soil management leads to lower costs, as long-term research increasingly shows.
Second, demand for sustainably produced wood and food is growing, resulting in a price premium, particularly in Europe. “Yields may be slightly lower initially, but this is offset by the higher prices you can achieve for your products.”
Technology also plays an increasing role in cost control and climate resilience. With sensors and satellite data, agricultural and forestry businesses can constantly monitor soil moisture, plant growth and risks like drought or storm damage. Precision irrigation and renewable energy, for example agrivoltaics, can reduce input and energy costs and make businesses more resilient to climate stress.
Fourth, additional revenue streams can emerge through carbon credits or other ecosystem services. “If you can show compliance with certain criteria, this offers additional financial returns, especially in forestry,” says Nierop.
In the long term, Nierop expects sustainably managed land to simply become more valuable. “Many investors overlook that conventionally managed farmland and forests can deteriorate so much that yields fall. That type of land will in the end be worth less than land managed that is managed in a sustainable way.”
A deep dive into nature-based solutions
The scaling challenge
Interest from institutional investors is growing, but scale remains a significant barrier to actual investment, Nierop believes. “If a pension fund wants to invest tens of millions and does not want to allocate more than 10 or 20% to a single fund, you quickly need a fund worth hundreds of millions,” he says. “Many initiatives are now simply too fragmented and small.”
As a result, institutional investors struggle to find scalable, professionally managed solutions that meet their governance and reporting requirements. According to Nierop, bundling projects can be part of the answer. He refers to the energy transition, where investments really took off once individual projects were grouped into larger portfolios. “That approach could work here as well.”
Nierop does not expect biodiversity to become a standalone investment category. “Just like climate, biodiversity is not a separate asset class,” he says. “The loss of biodiversity is a global development that runs through everything. It also intersects with other sustainability themes, such as climate change, tackling hunger and poverty and water scarcity."
A new generation and local partners
Nierop expects that a lot of land in Europe and North America will change hands in the coming years, because many farmers are nearing retirement. “A major transfer of land between generations is coming. That brings both an opportunity and a risk.”
The risk is that land may degrade further if it becomes part of large, conventional farming systems that rely on monocultures and heavy use of chemicals. At the same time, Nierop sees opportunities for parties that want to manage the available land in a sustainable way but need capital to do this.
Triodos Investment Management wants to fulfill a role here with a real assets strategy, in which the new fund takes equity stakes in agricultural and forestry land. In North America, the asset manager works together with Canadian partner Fondaction, a pension investor with broad experience in sustainable nature, agricultural and forestry investments.
Local operators with expertise in regenerative land management are key in this approach. “Land use is always local,” Nierop states. “A strategy like this only works if you have someone who can actually run a farm or forest.” The fund therefore works with local partners from the wide networks of Triodos and Fondaction. They manage the land and later have the option to take it over.
The shift from conventional to regenerative forestry and agriculture requires financial support. According to Nierop, a fund structure is well suited to provide this missing capital. “During such a transition, there are often two to five years with little or no yield. Banks find that difficult. We see the opportunities: for positive impact on nature and for long-term returns.”