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As part of our 5x for Nature Roadmap series, the Nature Investment Hub recently hosted a session on equity-based instruments with a number of partners and nature finance ecosystem members. Here we share some observations, reflections, and key takeaways from the session.
Equity has a key role to play for nature. Global investors are scaling their investments and Canada should keep pace. Patient capital is particularly useful in the nature context, where impact often requires 10-30 year horizons. Equity can also support different types of ownership models, e.g. it can enable Indigenous-led and community structure, and risk capital. There is an argument to be made that early ventures need equity, not loans.
On the same day as our equities session the Finance for Biodiversity Summit celebrated the 5th anniversary of the Biodiversity Pledge. This initiative has 200+ signatories with over $23 Trillion in assets under management and serves as an important market signal about appetite for biodiversity-aligned commitments.
We need to be mindful that public equity and private equity have very different asset classes, that operate at different scales along the capital continuum, work with differentiated additionality theses, and distinct enabling policy levers. They each focus on different types of solutions.
More Canadian examples need to come to the fore, including at the nexus of tech and nature, that can blend strong benefits and harness growth drivers. Domestically, VC and private/impact equity firms are looking to nature and tech-related opportunities, while Lester Asset Management’s Lynx Biodiversity Fund has shown it can be done in the public sphere.
1. Access to opportunities is not only a pipeline question: While the focus is often on whether there are sufficient investable opportunities in the nature space, there is also a barrier to those seeking to invest with more alignment to nature outcomes. An observation on ETF development – when operating in public equities there remains limited access for “everyday” investors who seek to see their values reflected in their investment portfolio.
2. There is no nature-centric benchmark, and therefore performance is represented as ‘underperforming’ by mainstream financial standards: Typically benchmarking is pegged to broad based stock indexes (e.g. S&P 500 or MSCI), which leads to a general perception of underperformance. This speaks to the need for specific benchmarks to discuss performance that is meaningful in a nature context.
3. Targeted guidance and disclosures: CIOs and PMs need practical guidance on how nature risk affects earnings, margins, supply chains etc. Until mainstream investors understand the pathways, capital will not move. Strengthening the voluntary disclosure regime is one place where institutional investors can leverage shareholder rights to engage their portfolio companies to improve and report on performance in the short term. Once a critical mass of disclosures is reached, then capital allocation decisions will also follow.
1. Create financing structures that match and aggregate micro-level innovation in corporate ownership structures: Participants noted the importance of financial innovation for nature to keep pace with governance innovation in the Canadian context. The Kwaxala example highlighted how policy change can open doors. Living Forest Shares provide a way for investors to deploy capital into projects with securitized outcome-based revenue. It allows deployment of large scale institutional capital into a network of small sovereign Indigenous projects without degrading their sovereignty. This allows capital to make its way to micro projects in a participatory fashion that decolonizes rather than leads to external ownership.
2. Tap into the ClimatexNature 2 for 1 option: It has been observed that there are an increasing number of member-based groups with significant capital that is ready to deploy, and balance sheets that are looking to closely align not only towards climate change but towards nature specifically.
Participants signalled an expectation that that attracting institutional investors will involve speaking to the climate benefits (carbon sequestration and improved resilience to physical risks), partnering with sectors that have a large exposure to dependencies on ecosystem services and physical climate risks (e.g. insurance and agriculture), and, ideally, reporting on the project’s governance and metrics in a way that can feed into TNFD.
In this regard, practitioners often point to a data challenge on the biodiversity side of the equation. The problem is not necessarily a lack of ecological data, but rather difficulties in making scientific and biocultural data financially relevant. Implementing globally-developed nature-related taxonomies, and leaving some room for supplementing scientific baselines with context-specific impact indicators can be an effective place to start.
3. Re-think sector bias in private equity dealflow for nature: In the private equity space there may be an over-emphasis on technology companies. This could inadvertently magnify an unrealistic expectation that we can “monitor our way out” of biodiversity decline, though these tools and associated data certainly have a role to play in the overall accounting and consideration of nature indicators as they relate to businesses productivity, risk exposure, and profitability.
Private equity and venture capital can develop and scale solutions that are deployed into large, resource-intensive companies, the ones whose operations have the greatest impact on land and ecosystems. By focusing capital on innovative, game-changing monitoring tools, we can dramatically improve how extractive business models operate.
The observations and reflections made in this session will be augmented by individual interviews and other NIH engagements (e.g. in-person sessions hosted to date, individual interviews, the NIH investor survey) to inform content in the Canadian Nature Finance Roadmap to be released in 2026. It will be launched first as a draft for comment and we will welcome feedback and additional inputs as we work towards a co-created final product.
There are additional insights and case examples captured in the session readout, check it out below.
Session Readout