Why Private Equity Can’t Afford to Ignore Nature
Explore how Private Equity firms can embed nature into investment decisions
4th June 2025
Insights
Table of Contents
- Why nature is on the agenda
- Where PE should focus
- How leading firms are adapting
- How Anthesis can support
- Contact us
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Private Equity (PE) firms have begun exploring nature-related strategies in recent years, often with caution, given the perceived lack of tangible returns. Many have treated nature as an extension of climate initiatives, applying similar methodologies without clear financial incentives. However, it is becoming evident that climate action cannot succeed without also addressing nature, and vice versa.
The market is evolving. The focus is shifting from narrow emissions reduction and removal to integrated climate and nature strategies that account for impacts, risks, dependencies, and opportunities across both domains. In this article, we explore why PE must act now, where to focus, and how to embed nature into investment decisions.
Why nature is now on the agenda
The Inextricable Link Between Climate and Nature
- Over 50% of global GDP ($44 trillion) is moderately or highly dependent on nature and its services, from pollination to water filtration.
- Nature can provide up to 37% of the mitigation needed to reach the goals of the Paris Agreement, while also playing a key role in adaptation and building resilience.
- Global wildlife populations have plunged by 73% on average since 1970, threatening the ecosystems underpinning supply chains.
- An unprecedented water crisis looms: global freshwater demand is predicted to exceed supply by 40% as soon as 2030.
Regulatory and Market Momentum
- As of April 2025, the IFRS Foundation and Taskforce on Nature-related Financial Disclosures (TNFD) have formalised their collaboration as part of the ongoing work of the International Sustainability Standards Board (ISSB) to enable nature-related financial disclosures for use by capital markets.
- As of October 2024, over 500 organisations managing $17.7 trillion in assets have committed to TNFD-aligned reporting, including leading PE firms like PAI Partners.
- The EU’s Corporate Sustainability Reporting Directive (CSRD) now mandates nature-related disclosures for large companies, with private equity portfolio companies soon to follow.
Financial Materiality
- UK & EU Context: Nature degradation could cause a 12% loss to UK GDP, a greater impact than that of the global financial crisis or Covid-19. These material financial impacts are likely to affect banks and other financial institutions, with some banks potentially seeing reductions of 4-5% in the value of domestic portfolios. In the EU, almost 75% of bank loans are granted to companies that are highly dependent on at least one ecosystem service. In the Netherlands, De Nederlandsche Bank conducted a TNFD-LEAP (Locate Evaluate Assess Prepare) assessment of assets in their own account investments and found that a substantial part of the portfolios could have high/very high impacts or dependencies on nature.
- Agriculture & Food Sectors: The agriculture sector faces risks associated with water, climate regulation, soil quality, and pollution, all of which are likely to impact food production. Land degradation could lead to a 12% reduction in food productivity in the next 25 years. Conversely, companies adopting regenerative agriculture practices (e.g., agroforestry) have seen yield increases of 15-20% while reducing input costs. Research shows that every US dollar invested in restoring degraded land generates approximately USD$ 7 – 30 in economic benefits.
- Utilities: The Utilities sector is particularly reliant on surface water for cooling power stations, which faces disruption due to water scarcity, potentially leading to increases in energy prices.
- Value Creation: By utilising frameworks such as the TNFD LEAP approach, investors can identify material nature-related risks and opportunities, leading to more strategic investment decisions and informed investment management. This can ultimately lead to value creation at exit for portfolio companies, through evidenced nature risk management, future-proofing, and seizing of relevant opportunities.
Where PE should focus: short-, medium-, and long-term levers
| Time Horizon | Justification | Focus Areas | Example Actions |
| Short-term | Proven ROI | Direct operations (e.g., agriculture, forestry) | Adopt regenerative farming (e.g., cover cropping, agroforestry, polyculture planting). |
| Medium-term | Emerging upside | Value chain (Tier 1–2 suppliers) | Screen for nature-related impacts, risks, and dependencies in due diligence; partner with suppliers to implement sustainable practices. |
| Long-term | Value creation & strategic differentiation | Portfolio-wide alignment | Set science-based nature targets (SBTN); leverage carbon credits with biodiversity co-benefits; review nature/biodiversity credit options as further options emerge. |
How leading firms are adapting
Due Diligence
Many firms are incorporating nature and biodiversity in due diligence and screening processes. For example, KKR identified a significant dependency and hence risk related to palm oil during the pre-acquisition due diligence of Unilever’s Upfield. To resolve this, the company committed to 100% sustainable palm oil sourcing, which the firm saw as a value creation opportunity.
Frameworks
PE firms are adopting nature-related frameworks, such as TNFD and SBTN, through materiality assessments, target setting, and disclosure and reporting. For example, Blackstone has joined the TNFD forum, contributing to the development of standardised nature-related disclosures and encouraging reporting on nature-related risks. PAI Partners has also developed the BLOOM framework, which is the firm’s structured approach to integrate nature considerations and promote nature positive actions within the investment lifecycle.
Natural Climate Solutions
Some of the world’s largest PE firms, such as Mirova, HSBC Asset Management, and Bregal Investments, are investing directly in projects aimed at carbon sequestration and ecosystem restoration through natural systems, including afforestation/reforestation, wetland restoration, mangroves, and biochar.
Nature- and Biodiversity-specific Investment Vehicles
Sienna Investment Managers and Mirova have created funds with the explicit goal of protecting or restoring nature and biodiversity.
Natural Capital Investment Strategies
Firms including Bregal Investments (Bregal Sphere Nature) and Climate Asset Management have developed investment strategies focused on natural capital, recognising the intrinsic and financial value of forests, water, biodiversity, and soils.
Key Takeaways for PE Firms:
Short-term: Prioritise nature in sectors with direct operational ties (e.g., food/ag), where ROI is proven.
Medium-term: Expand due diligence to critical suppliers—the majority of impacts lie within a company’s supply chain.
Long-term: Build nature into exit storytelling; TNFD-aligned reporting is now a key LP demand.
How Anthesis can support
Our global sustainable finance team designs, implements, and reports on responsible investment strategies, helping portfolio companies reach their potential. We support clients in creating strategies and policies on biodiversity, water, and deforestation, aligning with frameworks like TNFD, SBTN, and CSRD, while ensuring alignment with industry best practices. We offer comprehensive support through the following services:
GP Support:
- Nature Risk and Opportunity Evaluation: Developing tailored approaches to assess portfolio-level risks and opportunities.
- Nature Strategy Development: Developing firm-wide strategies and policies aligned with industry standards and enhancing how nature is integrated into responsible investment programs.
- Reporting readiness: Gap analysis and preparation for TNFD and CSRD disclosure.
Pre-acquisition:
- Nature Due Diligence: Evaluating portfolio company dependencies and impacts and integrating risks and opportunities into acquisitions.
Active Ownership:
- Nature Strategy Development: Creating TCFD-aligned strategies, conducting materiality assessments, engaging stakeholders, and designing KPIs to track progress.
- Risk and Opportunity Assessment: Evaluating risks using tools like ENCORE and WWF Risk Filters, assessing supply chain impacts.
- Disclosure and Compliance: Conducting workshops to identify disclosure risks, aligning reporting with PRO, SFDR, TCFD, and TNFD standards.
- Value-Driven Research: Analysing financial links with nature, identifying revenue streams like biodiversity/nature credits and carbon offsets.
- Peer Benchmarking: Comparing competitors to position portfolio companies effectively.
- Policy and Strategy Integration: Enhancing policies aligned with TNFD, SBTN, and CSRD, and developing nature-related targets.
- Training and Capacity Building: Delivering training on nature and biodiversity, regulations, and sustainability.
Nature can no longer be ignored. With $17.7 trillion in assets already committed to TNFD, firms that act now will mitigate risks, unlock revenue, and stay ahead of the curve.
Contact us below to discuss how to turn nature from a risk into a return driver.
We are the world’s leading purpose driven, digitally enabled, science-based activator. And always welcome inquiries and partnerships to drive positive change together.
