Political Challenges Failed to Deter Nature's Investment Growth, According to Report
Institutional investors are increasingly shifting their focus towards nature-based investments, according to a new study by Pollination, a climate change investment and advisory firm. The study, based on a survey of 500 institutional investors in the UK, US, Australia, Singapore, and Japan, with assets under management ranging from $10bn to $500bn, reveals a significant shift in investor appetite for these investments.
The study found that only 0.2% of those surveyed this year are not planning on boosting their allocation to nature-based investments. Despite the politicisation of Environmental, Social, and Governance (ESG) affecting 96% of investors' strategies, 99% are planning to increase their nature-based investments.
However, structural barriers remain, according to Pollination. These challenges include a lack of investable opportunities and project pipeline, limited capacity and expertise, measurement and data challenges, definitional and regulatory gaps, long return horizons and upfront costs, concerns over ecological and social integrity, and market and policy risks.
To address these challenges, institutional investors are employing various strategies. They are increasingly acquiring specialist firms, hiring external experts, and forming partnerships to build capacity and access deal flow. Innovative financing mechanisms, such as blended finance, debt-for-nature swaps, impact bonds, nature-linked debt, and green bonds, are emerging tools to reduce risk, improve project bankability, and attract capital at scale.
Efforts are also being made to develop stronger standards and transparency practices, with initiatives such as ICMA's Nature Bond Guidance aiming to improve market integrity and investor confidence. Investors recognise the need for stronger public sector action to fund public goods, reform subsidies, and harmonise taxonomy and regulatory frameworks to unlock nature finance potential.
Some funds emphasise Indigenous leadership and community co-ownership to improve social outcomes and investment transparency, providing more durable and ethical projects. Cerecina, from Pollination, stated that investors need a stronger pipeline of investable projects, greater confidence in data, and more consistent standards.
The main reason for investing in nature has shifted from risk mitigation and inclusion to financial returns, with 43% of all investors citing financial returns as the primary reason. This shift is evident in the growing interest in tools such as nature-linked debt, blended finance, and real asset funds, especially in agriculture and infrastructure.
The study also highlights changes in investor concerns regarding nature-related financial risk. In the 2025 edition of the survey, chemicals, materials, and manufacturing emerged as the main concerns, compared to agriculture and property in the 2023 survey.
Recent developments in nature-based investments include Cibus Capital co-leading a $40m robot mushroom investment and Export Finance Australia providing a $100m loan to EAAIF. Investors in Singapore are focusing on bringing in experts to boost their nature investments, with 52% of respondents planning to do so. Forty-four percent of Australian investors are planning to form new partnerships to boost nature investments. EBRD, EIB, and SEB have provided €84.8m in loans for Latvia solar projects.
In conclusion, while institutional investors see clear long-term value in nature-based investments, structural barriers remain significant. Investors are addressing these by leveraging specialist expertise, innovative finance models, standards development, and partnerships with public and community actors to scale sustainable capital flows.
- Despite the politicization of Environmental, Social, and Governance (ESG) affecting most investors' strategies, 99% are planning to increase their investments in nature-based projects.
- Innovative financing mechanisms, such as blended finance and green bonds, are emerging tools that institutional investors are employing to reduce risk, improve project bankability, and attract capital at scale.
- Cerecina, from Pollination, stated that investors need a stronger pipeline of investable projects, greater confidence in data, and more consistent standards to effectively address the challenges in nature-based investments.
- The financial returns have become the primary reason for investing in nature, with 43% of all investors citing this as the main motivation, leading to a growing interest in tools like nature-linked debt, blended finance, and real asset funds, particularly in agriculture and infrastructure.
