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Authored by Rishi Basak (Senior Advisor, Nature Investment Hub) with contributions from Hamish Stewart (Senior Advisor, Nature & Ocean Finance, Nature Investment Hub)
March 2026
Last month we published a piece that argued that the closure of biodiversity-labelled equity funds are often a “product economics” problem, not an investment thesis problem. What this means is that asset managers have not yet been able to grow these funds to be big enough to earn the necessary fees they require to sustain themselves. The deeper constraint is a policy environment that still allows nature degradation to remain either completely unaccounted for or a low cost solution for those doing the degrading. The Mount Polley tailings disaster is just one example where dumping millions of tonnes of toxic waste into the environment is seen as an acceptable cost of doing business, leaving the immediate and longer term impacts on biodiversity and habitats unaccounted for.
This piece sits between those two arguments. Even in an imperfect policy environment, well-structured, patient capital can give an investment-grade biodiversity strategy the stability it needs to survive long enough to matter. Anchor capital is one of the most practical tools available. It is also one of the most misunderstood.
Anchor capital is an early commitment from one or more investors (typically an institutional investor) that provides a fund or a project with a meaningful, stable base of assets from or near inception. The anchor is not just a large investor. It is an investor whose commitment is structured to be durable: locked up for long enough, and sized significantly enough, that the fund can finance its operating model and pursue its strategy without constant anxiety about the next redemption cycle. This commitment makes the investment more attractive for follow-on investors because it is considered to be less risky than would be the case without an anchor investor.
The distinction matters because a fund that is technically large enough to be viable can still be structurally fragile if its assets are concentrated in investors who can leave quickly (fair-weather friends!). Anchor capital mitigates this risk. It buys time. Time for the strategy to perform, for the distribution base to broaden, and for the thematic investment or project finance category itself to mature. In the case of nature and biodiversity strategies, that time is not a luxury. It is an operational necessity in an evolving market.
As the first piece in this series argued, the fixed costs of running a credible nature strategy (e.g. fund set-up, structuring stewardship, specialized data, documentation, verification, and investment team salaries) do not fall quickly when assets under management fall. A fund that loses a large investor early on may not be able to maintain the operating model that justified the strategy in the first place.
The most common source of anchor capital is what is referred to as a cornerstone investor: a single institutional investor that commits a substantial share of the fund’s initial target. That’s often twenty to thirty percent, sometimes more. The cornerstone investor’s involvement signals credibility to subsequent investors. Cornerstones are valuable for two reasons that are easy to conflate. The first is economic: the commitment provides revenue that covers a meaningful portion of fixed costs from day one. The second is reputational: a credible cornerstone reduces the due diligence burden for other allocators, particularly in a category that is still earning its place in institutional portfolios. Both matter, but they require different things from the relationship.
The economic value requires that the commitment be real and durable. This means it needs to be structured, and with good “lock-up” terms (i.e., restrictions to prevent them from pulling their money out of the fund too early).
The reputational value requires that the cornerstone is genuinely credible to the other asset allocators whose money you want to have committed to your strategy. A development finance institution, a large pension fund with a public sustainability mandate, or a sovereign wealth fund with nature commitments can each play this role. A family office or a strategic corporate treasury team with an obvious commercial interest in the fund’s holdings can work but will send a weaker signal.
Lock-up terms are where anchor arrangements either hold or unravel. The basic logic is simple: a lock-up agreement converts an intention to stay into a structural commitment to stay. If you manage to get an initial lock-up of three to five years, then another hard conversation is about what happens after the lock-up period expires. A fund that survives on anchor capital alone for three years and has not broadened its investor base has not solved its fragility problem. It has only delayed a day of reckoning. Lock-ups should be designed alongside a distribution and fund marketing plan that brings in new investors, not as a substitute for one.
There are also structural questions about how lock-ups interact with liquidity terms for other investors. If anchor investors have materially different redemption rights than the broader investor base, that asymmetry needs to be disclosed and managed carefully. The perception that certain investors have an exit lane that others do not can undermine fund cohesion and confidence in the management team at exactly the moment when it matters most.
Side letters are a normal part of institutional fund relationships. They allow large investors to negotiate terms that reflect the scale and nature of their commitment (e.g., reporting formats, fee arrangements, transparency rights, co-investment access). Used well, they are a reasonable tool for recognizing that a cornerstone investor taking on concentration risk and providing reputational capital deserves something in return.
Risks arise when side letters accumulate into a set of commitments that are inconsistent with each other, or that collectively create obligations the fund cannot sustain, or both. You don’t want to be facing reporting obligations that require custom work for each major investor, or be granting fund governance rights that give multiple investors overlapping influence without a clear mechanism for resolving disagreement.
For nature strategies specifically, many institutional investors will each have their own sustainability reporting requirements and will ask for data and attribution that aligns with their frameworks. That is legitimate. But if ten cornerstone investors each want bespoke impact reporting in their preferred format, the fixed cost of producing it can quietly become significant. Standardizing what can be standardized should be part of responsible anchor structuring, and not be considered just an administrative detail.
Large investors who commit early and take on concentration risk reasonably expect some form of influence over how the fund is governed. The question is how to structure that influence so it is meaningful without being destabilizing. Governance rights given to anchor investors should be designed to improve the quality of oversight, not to give any single investor the ability to block or redirect the strategy.
Everything discussed so far treats anchor capital as a private investment contribution. But there is a second and structurally distinct form of anchor that operates at the level of public finance: the deliberate use of levy and tax revenue as the stable, predictable base that attracts and de-risks private investment. In this model, the anchor is not an institution. It is an external revenue stream that feeds the fund over time.
The gap this is trying to close is not marginal. According to UNEP’s State of Finance for Nature 2026, for roughly every dollar currently spent protecting nature, an estimated thirty flows into activities that degrade it. Think fossil fuel subsidies, harmful agricultural support and land-use incentives, and exploration tax credits. Levies are the primary mechanism available to begin flipping that ratio. A pesticide or fertilizer levy can underwrite the transition to regenerative agriculture at a scale that voluntary capital cannot reach. A plastic tax channelled into circular economy infrastructure does the same for waste. Alberta’s programme for funding abandoned oil well remediation, the Orphan Fund Levy is an example of what not to do, in terms of woefully undercapitalizing environmental remediation with this type of system. There are many examples of these structures and in each case, the levy or tax should do two things at once: accurately price the harm and finance the remedy.
One of the most well known examples of this type of levy being used to build up a fund is the 9 cent-per-barrel oil tax on domestic and imported oil into the United States’ federal Oil Spill Liability Trust Fund (OSLTF). Authorized by Congress following the Exxon Valdez disaster, it is the US’ core standalone financial instrument for oil spill prevention and response, earning about $500 million per year from the nominal excise oil tax, about 0.1% of annual US oil industry revenue. This instrument is being paused under the current US administration but provides an important example of the effectiveness of environmental levies in generating anchor capital.
A powerful version of this can also operate across borders. A coordinated levy on aviation or maritime emissions could generate substantial sums annually. A financial transaction tax applied to high-frequency currency or equity trades at even fractional rates produces a similar order of magnitude. But the obstacle, as with most of what would actually work at scale in this space, is political. Global solidarity levies require international agreement. Domestic environmental taxes require governments to sustain fiscal positions across election cycles and in the face of industry opposition that is well-organized and well-funded. Subsidy reform means confronting agricultural lobbies, fuel importers, and industrial sectors that have built their cost structures around cheap access to natural systems. Political will and international coordination are the two inputs without which none of this functions. They are also, at the moment, in conspicuously short supply.
The multilateral system is under more strain than at any point in a generation, and the governments that made the loudest nature and climate pledges in 2022 are now navigating fiscal consolidation and a reordering of geopolitical priorities that makes long-horizon commitments feel, to many finance ministries, like an unaffordable luxury. The structural case for levy-anchored nature finance is sound. The political conditions required to build it are not currently in place.
Anchor capital is a structural tool for a fund that has a credible strategy, a realistic path to broader distribution, and an operating model that can be financed at launch scale. But the concept of an anchor does not stop at the fund level. The same logic applies to the broader financing system: for nature strategies to move from viable to scalable, the private capital they seek to mobilize needs its own anchor – a stable, recurring, sovereign-backed revenue stream that de-risks the market as a whole. That is what well-designed levies and environmental taxes can provide, and what the current system conspicuously lacks. Until the ratio of capital flowing into nature destruction over nature protection is closer to one-to-one than thirty-to-one, fund-level anchors are necessary but not sufficient.
For the fund manager sitting across the table from a cornerstone investor, none of that changes the immediate task. Anchor structures, done well, remain one of the most practical ways to bake in durability at launch. But they require the same discipline as the rest of the fund: clear economics, honest expectations, and transparent governance that serves all investors in the strategy.
