Gresham House eyes ‘different set of investors’ for biodiversity and other niche strategies

British sustainable fund manager Gresham House is seeking to raise $380 million to invest in projects that generate biodiversity net gain units, according to a statement. It is the first of three sector-specific funds the firm has in development as it expands its sustainable infrastructure platform.

The strategy has been designed to capitalise on developers’ need to meet the biodiversity net gain obligations placed on them by the UK’s Environment Act 2021, which came into force last week. Under the new requirements, all developments must achieve a biodiversity net gain of at least 10 percent in order to receive planning permission.

The new fund will invest in ‘habitat banks’ created by Environment Bank – a portfolio company of the firm’s sustainable infrastructure fund – which turn non-arable farmland into mosaics of woodlands, wetlands and grasslands. These generate biodiversity net gain units, which can then be sold to developers to allow them to comply with regulation.

Clients of consultant Willis Towers Watson have acted as anchor investors. The firm expects the strategy to attract a different breed of LPs to its main social infrastructure strategy. British Sustainable Infrastructure Fund (BSIF) II, which makes SDG-aligned investments in UK infrastructure, closed on £450 million late last year after receiving capital from eight Local Government Pension Schemes.

“We think this will appeal to potentially a slightly different set of investors,” managing director of sustainable infrastructure Peter Bachmann told New Private Markets. “Our current investors are predominantly LGPS and they quite like the diversified nature of what we do with BSIF. There’s probably another subset of investors out there, potentially overseas, potentially different institutional types, that want various sector specialist type exposures.

“That’s probably where this biodiversity fund will be most appealing because they want to invest in something with tangible natural capital. They want to do something that really taps into this nature biodiversity angle. More investors are realising you can’t do net zero without nature. This is one of the very few pure play private equity vehicles that do that.”

Strategic plans

The biodiversity strategy is one of three sector-specific funds Gresham House is looking to raise in addition to its main sustainable infrastructure strategy. The other two funds will focus on vertical farming and digital infrastructure, and are set to launch later this year.

Bachmann said: “We are creating an ecosystem whereby we can continue to raise diversified funds because that appeals to an investor looking for a diversified exposure, and we’ve got these specialist funds that are there for people that want specific risks. But ultimately, they all still invest into broadly the same assets and the same strategy.

“For the vertical farming/Future of Food Infrastructure platform, we’ve decided to talk to investors around summertime with a view to trying to get to a first close by the end of the year. The final one is around the digital infrastructure side, and we’re actively speaking to some LPs to provide some additional capital in this sector of critical infrastructure.”

The firm also plans to bring the next iteration of its main strategy to market in the coming months, Bachmann said. “For BSIF III, we’re out starting to have premarket conversations with investors now. So that’s something that we’d be looking to try to get to a first close on this year and ideally around the summertime given our £2bn+ of controlled pipeline.”