Impact investors launch $300m natural capital fund – but it doesn't depend on carbon credits

Two impact firms are making a big bet on nature – but carbon credits are not the selling point.

Triodos Investment Management and Fondaction Asset Management (FAM) are raising €300m a fund to buy farmland and forests across Europe and North America.

The vehicle, called Value Nature Fund I, will acquire land across both continents and shift it from conventional to "regenerative management."

It is one of the largest vehicles of its kind to target both continents simultaneously. The fund is seeking Article 9 classification under SFDR, the EU's most stringent sustainable finance label.

Not leaning on carbon credits

Natural capital funds have surged in recent years. These funds typically buy land – or fund its acquisition by a third party – after which specialists restore it by, for instance, planting trees, reintroducing wildlife, or converting to regenerative agriculture.

Carbon and biodiversity credits generated by that restoration are then sold to companies or governments looking to offset their emissions or environmental impact.

However, Karel Nierop, head of products and solutions at Triodos Investment Management, says its new fund is not built around credit revenues.

"Carbon credits can provide additional upside, but they are not the core investment thesis," he tells Impact Loop via email. "Returns are fundamentally driven by the economics of better-managed land: more resilient yields, lower long-term costs and stronger exit attractiveness."

"Value creation comes from actively improving the underlying asset," Nierop continues. "Restoring soil health, reducing dependency on external inputs, improving resilience to climate risks, obtaining sustainability certifications and professionalising operations."

Own and operate

The new fund will buy land outright rather than using leases or conservation easements. Nierop says direct ownership is necessary to ensure management practices actually change on the ground.

The fund has a 12-year life.

Nierop says investors in the fund should expect a build-up period before income starts flowing.

"Income generation typically starts thereafter and increases over time as assets mature and operations stabilise," he says.

Nierop says exit buyers could include strategic operators, evergreen funds or institutional investors.

"A key consideration at exit is ensuring that regenerative practices are sustained beyond our ownership," he says.

The opportunity

Nierop says most land is still managed in ways that harm the environment.

"The vast majority of farmland and forestry is still managed conventionally, often in ways that degrade soils, biodiversity and long-term productivity," he says.

He also flags a shift in land ownership patterns.

"We expect a major generational transfer of land ownership over the coming decade, creating a unique window to accelerate transition," he says.

The partnership

Triodos IM and FAM met through impact investing networks several years ago, says Nierop.

"Triodos brings deep European roots and a strong track record in agriculture and nature-based solutions," Nierop says. "Fondaction brings a strong North American investment network and specific expertise in environmental markets, including carbon."

All investment decisions are taken unanimously by a joint committee with representatives from both firms. Nierop says local partners from each firm's network handle origination on the ground.

Fondaction has committed C$25m as a cornerstone investor. The managers are targeting a first close later this year. They say they are in advanced talks with pension funds, insurers and family offices on both sides of the Atlantic.