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What could you do with a million dollars?

How about two million? Or even five?

For institutional investors, the answer is: not much.

When it comes to investing in nature, anything under USD 100 million is often considered ‘too small’ to be worthwhile.

This poses a significant obstacle for conservation projects trying to scale up – one that was voiced at this month’s IUCN World Conservation Congress in Abu Dhabi, UAE.

Why are institutions hesitant to invest in ‘small’ projects?

Institutional investors are organizations like pension funds, insurance companies and hedge funds, which pool large amounts of capital from various contributors and then invest it.

These investments involve work – and the amount of work involved doesn’t really change with the size of the investment.

“The little project has the same issues as a big one,” says Valeria Ramundo Orlando, partner and co-founder at Greensquare Ventures.

“Same amount of emails, same amount of calls, same amount of one-on-ones, same amount of direct participation.”

And the same amount of work means the same amount of time and money, which is most noticeable when doing due diligence.

Due diligence is the research and analysis undertaken before committing to invest in a project.

Regular due diligence can already take up to three months, Ramundo Orlando tells us, and small projects often have very unique requirements.

Trying to do that due diligence across many small projects would be unworkable for most institutions.

“Now [if] you’ve got 10 projects, most likely in different locations, how am I going to do due diligence for all of them?” says Ramundo Orlando. “It will take years.”

If an institutional investor is looking to distribute USD 300 million, for instance, it’s a lot simpler, cheaper and faster for them to find a few big projects rather than 30 small ones.

“You have to still go through the same process, and you’re saying: ‘why am I doing this for 2 million when I can do this for 20?” she explains.

“And so, that project – it’s unfunded.”

It’s important to note that this isn’t necessarily because institutions are unwilling to put in the extra work. Rather, investors often have a legal obligation to the people whose money they are investing.

This is called fiduciary responsibility, which means institutional investors must act in the best interests of their contributors.

And this ‘best interest’ is often interpreted as the highest return – meaning if it makes more financial sense to invest in large projects, institutional investors could be legally obliged to do so.

Why look to large investors?

Considering all the hurdles, why would nature projects look to large institutional investors in the first place?

It’s partly down to time.

Institutions have the heft to invest large amounts of money for long periods of time, which isn’t something that other entities can do.

“When you’re looking at asset managers, they’re not staying in the position for more than three years – they will never touch nature,” says Ramundo Orlando.

The majority of the markets are looking for returns within 18 months, she adds.

Institutional investors, on the other hand, are looking to invest for seven to 10 years – much more aligned to what these projects need.

But ‘long term’ by finance standards can still be too short for nature.

“We’ve been trying to raise USD 12 million through an outcome bond to fund our Women Empowered Carbon Removal Program, but the model stalled because the bank structuring the outcome bond wanted higher returns than the project could realistically deliver,” says Hannah Simmons, founder and CEO of ERA.

“Our project’s value unfolds over 40 years – but markets want returns in five.”

For Simmons, this need for speedy returns is at the heart of the difficulty of securing institutional investment.

“The financial system isn’t built for ‘slow capital’, even though the nature-based economy depends on it, she points out.

“The time horizons of ecosystems and those of investors simply don’t align.”

Another hurdle is that not all projects are treated equally.

What does it mean to invest in nature?

There are many shades of nature investment, but broadly speaking, it means directing money to projects, businesses and instruments that restore and protect ecosystems.

This nebulousness means that investing in a local reforestation project can be treated the same as investing in a large direct air capture (DAC) plant.

That can cause issues when it comes to which nature projects investors choose.

“Reforestation carbon credits are undervalued – selling for USD 25–50 per tonne, while tech-based removals like DAC or biochar routinely fetch USD 150+ per tonne,” says Simmons.

“Yet the best, most proven low-cost technology for removing carbon is still trees – which also restore biodiversity, water systems and livelihoods. It’s a paradox that the most holistic solutions are the least rewarded.”

Ramundo Orlando believes this is because many green tech firms are now past their initial startup phase and are in a growth phase.

It’s also an industry that investors already know – structured in ways they recognize. Technology companies, green or otherwise, know how to talk to finance, unlike the majority of nature projects.

“It’s not that investors don’t want to invest in biodiversity and nature,” says Ramundo Orlando – it’s that projects don’t know how to present themselves to investors. That makes it difficult for them to gain any traction.

“People always forget that there is a credit and an investment committee in every large investor, and they will determine whether something gets invested in or not,” she explains.

“If the foundations of a project are not structured in a way that they can not only recognize but compare to something that has already been done, it’s not going to pass, because you’re asking those board people to take personal responsibility.”

However negative this may seem, it does also offer a possible step that projects can take: learn to speak the language of finance.

How can we scale up private investment in nature?

A lot of times, projects are so geared towards obtaining grants that they’re not focusing on how to make themselves investable, Ramundo Orlando says.

If nature projects are recognizably structured, credit and investment committees will be a lot more willing to give them the green light.

“Make your documents financially readable, because then, you get your investment”, she emphasizes.

An approach that has been gaining traction in recent years is the use of blended finance, which mixes philanthropic, institutional and public capital together.

This mix can offer the kind of ‘slow capital’ that nature projects require, while still attracting private interest by offering a familiar product.

“Blended finance is something that institutional investors and banks are very comfortable with because it’s a structure – it’s now recognizable,” says Ramundo Orlando.

How much is already invested in nature?

Despite small projects struggling to access large capital, there has been a rapid increase in private nature investment in recent years.

Private finance for nature reached more than USD 102 billion in 2024 – an 11-fold increase in just four years, according to the United Nations Environment Programme Finance Initiative (UNEP FI).

“This new data documenting the surge in private nature finance mirrors the uptick we see amongst our membership to learn more about nature,” said Eric Usher, Head of UNEP FI, in a statement at the time.

But nature still faces a USD 700 billion per year shortfall in funding, much which is expected to come from private capital. Closing this gap will require a significant shift in mentality.

That will include expanding our understanding of ‘best interests’ beyond monetary returns so that banks are required not only to maximize returns for investors but also for the planet.

It also means moving nature investments outside of their traditional silos.

“Climate and biodiversity finance cannot be either or – it must be both at the same time,” said Serge Wilmes, Luxembourg’s minister of the environment, climate and biodiversity, in a speech at the IUCN World Conservation Congress.

“Everything is connected, and this was precisely the spirit of Rio in 1992,” he added, referring to the Earth Summit that led to the birth of the Rio Conventions.

“Understanding these connections will help in closing the gap for restorative finance.”

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