In a new investor survey report from Nature Investment Hub, investors take stock of the state of nature investment in Canada. This survey is a first-of-its kind effort to benchmark progress on Canada’s nature finance market. The survey results show that meaningful nature finance activity is already underway, with expectations to grow over the next five years. However, investors identify that there is currently a lack of opportunity to allocate more capital in nature in Canada. The message from investors is clear: more investable nature finance opportunities are needed in Canada, and increasing investment relies upon whether attractive opportunities grow at pace.
About the survey
The new annual investor survey that informed this report explores where funds are flowing, existing barriers that can be addressed, and perceived opportunities and priorities to accelerate nature investment in Canada. The 2024 survey respondents included a range of investor types: investment management firms, foundations, pension funds, banks, and one family office. Collectively the respondents’ assets under management are over 250B. The report is intended to inform those directly investing in nature and those influencing the space, as well as to guide future conversations and strategies to engage investors. Informed by these results and future iterations of this survey, the intention is to inspire ways to encourage capital investment into activities that conserve, restore and sustainably manage nature in collaboration with all partners that have a stake and interest in advancing nature finance in Canada.
The challenge
Globally and nationally, there is a significant funding gap to meet biodiversity and climate-related targets. Nature investment in Canada is lagging compared to other G8 economies, despite investor interest and the extent of Canada’s land and waters. At the same time, financial institutions and corporate organizations are facing increased expectations to account for and disclose their impact on climate and nature.
The current state of nature finance shows that meaningful nature finance activity is already underway, and the vast majority of investors expect to maintain or increase investment in nature within the next five years. Nature finance is a growth market for Canada.
The majority of respondents have under 5% AUM allocated to nature in Canada. Only one respondent has more than 10%. Venture capital, bonds (green as well as impact/performance), and listed equities are the primary investment vehicles being used currently. There is an overall trend of maintaining or increasing investment in nature. Respondents signalled that the percentage range invested would either stay the same or increase within the next five years. Within five years there will be fewer investors with less than 1%, and substantial growth in the number allocating between the 11-25% range.
The top driving factors for investing in nature signalled by respondents were climate change (67%), impact/responsible investment mandate (67%), and biodiversity outcomes (56%). The investment themes of most interest were sustainable agriculture, sustainable forestry, and Indigenous Protected and Conserved Areas (IPCAs).
Growth in investment is expected particularly in the sustainable agriculture sector, and the most anticipated growth relative to current investment volume (where it is minimal or non-existent) are marine related, specifically blue bonds and blue carbon. There is investor appetite for options that address the twin crises of biodiversity and climate change together through nature-based solutions, and increased collaboration with Indigenous partners to grow opportunities for economic inclusion and Reconciliation.
The message from investors is clear: investable nature finance opportunities are needed, and increasing investment relies upon whether attractive opportunities grow at pace.
The top three priorities for individual organizations to increase their investment in nature were all related to the supply of investable opportunities: increase supply and reliability of projects; increase availability of investment opportunities; and a desire for more evidence of successful investment models. For the investment ecosystem as a whole, respondents specifically indicated the need for more public market investment opportunities (58%), enhanced external nature expertise (57%), and greater clarity/standardization of impact measurement (57%).
Preferred deal size reported tended to be commensurate with the scale of the investor, ranging from under 1M to 50B+. This serves as an important reminder that capital allocation to nature requires alignment in terms of impact and outcomes, but also level of investment and therefore right-sizing deals to enable financial flows. Most respondents (90%) indicated that they were willing to accept the same level of risk as other impact or responsible investments (commensurate with asset class). Ten percent signalled that they are willing to accept more risk than average when investing in nature. Return expectations were similar to other impact investment expectations, with some willingness to accept lower than market rate returns. No respondents were willing to accept cost recovery investments.
Barriers stand in the way of accelerating nature finance, and they can be overcome by key moves that can unlock the market.
Investors are looking for key factors that would lead them individually or institutionally to increase investment in nature: higher returns, more risk sharing, improved data, more liquid opportunities, and larger scale opportunities. Across the ecosystem as a whole, investors identified top priorities: increase investment-ready opportunities, more examples of investments or products with track records, more public market investment opportunities, enhanced external expertise, and greater clarity and standardization of impact measurement. Investors also want to see action on information infrastructure needs and technological solutions.
The dearth of available opportunities that meet investor needs indicates a need for enabling activities, regulatory changes and incentives that inject more funding into capacity building and the early-stage development of projects or financial products. These enabling activities are prerequisites to build a more substantial and reliable investment pipeline.
If we make these key moves to unlock the market, there is a tremendous opportunity to scale investment in economic and environmental resilience, right at home in Canada. There is an opportunity for public, philanthropic, and blended approaches to enable private capital to play a larger role in financing nature-positive activities that have a myriad of benefits — including financial returns.