The current state, opportunities & challenges for upscaling private investment in biodiversity in Europe

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Sophus zu Ermgassen
6th February 2025
3 minutes read

 

We have just published a new paper in Nature Ecology & Evolution following 3 years of work: “The current state, opportunities & challenges for upscaling private investment in biodiversity in Europe“.

Our team Thomas Lundhede, Bo Jellesmark Thorsen, Qian Liu, Isobel Hawkins and Joe W Bull from the SUPERB project ran 3 focus groups with biodiversity finance experts across Europe, and I interviewed 25 top experts.

In short, here were the key themes:

Opportunities:
-Changes in macroeconomic conditions that are putting pressure on farming, emerging regulations which could plausibly increase demand, & changes in societal expectations and values
-Innovation – financial, technological, & increasing levels of professional experience bringing down novelty and transaction costs

Challenges:
-The ongoing lack of *highly* profitable investment opportunities, coupled with investors’ low risk tolerance
-Large political & regulatory risks
-Some fundamental conflicts between the nature of conservation projects and the needs of investors
-Risks from social perceptions that nature markets have the potential to exacerbate inequalities

A really interesting finding I think from the work was that governments were perceived both as the major catalyst of increased investment, but also one of the biggest barriers. Direct public investment was still generally perceived as the most important thing. Additionally, I identified a number of internal contradictions within government policies that need to be addressed if the vision of upscaling private investment is to be realised:

-Poor coordination between different government policies and funding sources. The main one that came out here was the way agricultural subsidies ‘compete’ with nature markets. There is a need for much better coordination between government policies to direct the types of funding that suit the characteristics of each project into the right places.
-Investors seek de-risking… but one of the key risks they seek to mitigate is political and regulatory risks presented by government itself.

My take is people generally underestimate how large the role of public policy would have to be to enable that vision & the investment required. Governments would have to a) create the investment opportunities through nature-related markets; b) govern the markets to ensure they work; c) de-risk the markets to incentivise private actors to invest. Doing this effectively would require vast investment, and for me it is still ambiguous whether the upscaling of private investment in nature is more efficient or cost-effective than direct public financing, given the huge administrative capacity and regulatory change required. We argue therefore that the private vs public investment dichotomy is misleading – private investment in nature is better perceived as an extension of public policy.

Read the full paper here: https://www.nature.com/articles/s41559-024-02632-0 

Author

Sophus zu Ermgassen | Nature finance lead, Nature-positive Hub
 I am an ecological economist specialising in biodiversity finance, nature-positive organisations, infrastructure sustainability, sustainable finance, biodiversity offsetting and ecological economics. My academic research features regularly in popular media including the Guardian, BBC Countryfile, the Times, Sky News, the Financial Times and the ENDS report. I currently am currently a Specialist Advisor to Parliament’s Environmental Audit Committee and have held 3 expert advisory roles for the UK government: on Natural England’s Biodiversity Net Gain Monitoring and Evaluation expert advisory group; the UK Treasury’s Biodiversity Economics working group; and to the International Advisory Panel on Biodiversity Credits. I was an expert contributor to the 2022 UK Environmental Audit Committee report on Biodiversity and Ecosystems, the Parliamentary Office for Science and Technology POSTBrief on ‘Biodiversity Net Gain’, and POSTnotes on biodiversity offsetting and just sustainability transitions. I also work as a freelance consultant, including hosting seminars and advising multilateral development institutions and companies on biodiversity net gain, biodiversity offset policy, nature-positive strategy and biodiversity safeguards. I lecture on Masters programmes at the University of Oxford, Surrey, and Imperial as well as Oxford University executive education and school access programmes, and lead a team of nature finance and biodiversity offsetting researchers. I’m co-host of the European Society for Ecological Economics podcast “Economics for Rebels”, and I co-direct the NatureFinance@Oxford seminar series at the University. I was named as one of the 100 most influential environmental professionals in the UK by newspaper the ENDS Report in 2022, won the UKRI Natural Environment Research Council’s early career policy impact award in 2023, led the team that won runner up most impactful research project at Oxford University in 2024 at the Vice-Chancellor’s Awards, and was named as the most impactful early-career researcher in Oxford University’s Medical, Physical and Life Sciences Division in 2024.

My Postdoc is funded by EU Horizon 2020 project “SUPERB”, focusing on understanding and evaluating the mechanisms for financing the restoration of ecosystems across Europe. I also lead an AGILE Sprint on how the UK governments can achieve its finance goals under the Kunming-Montreal global biodiversity framework.
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