How one family office is helping nature-based ventures attract institutional capital
As the world grapples with pressing environmental issues, a new frontier emerges at the intersection of finance and ecology: nature-based solutions.
In a recent panel discussion at AsianInvestor’s Family Office Briefing on November 28, Yuni Choi, director of investments at RS Group and head of investments at Terratai, shared insights from this once-niche field that is swiftly gaining traction among institutional investors and family offices alike, especially as demand for preserving biodiversity starts to gain traction.
A veteran of the ESG investing journey, Choi is well-versed in navigating this new terrain.
RS Group/Terratai
"Without really supporting the local and indigenous communities, we cannot really have long term, sustainable impact on nature," Choi told the AsianInvestor audience.
Grounded in a deep understanding of local communities and the issues they face, RS Group's nature-based investments aim to address systemic issues and provide sustainable returns.
RS Group, she explains, is an "impact first investor", where potential impact is the first criterion when it comes to screening opportunities.
“The group's flexible investment approach ranges from equity, convertible debt to revenue sharing loans, based on the specific needs of the ventures they support,” she said.
INVESTING FOR IMPACT
Choi also heads investments for Terratai, a venture builder for nature-based solutions focused on Southeast Asia.
Her firm was inspired by the “lack of investable companies in the region”, despite the surge of interest in nature-based solutions.
"A lot of investors are really struggling to find companies that are ready to receive institutional capital," she said.
“Terratai's mission is to incubate ventures that can attract institutional capital, providing not just financial support but also operational assistance.”
Choi cited Fair Ventures and Blue Finance as examples of RS Group's investments.
“Fair Ventures has developed a blended finance facility to scale agroforestry models in Indonesia, a holistic solution delivering on biodiversity, climate, and social impact,” she explained.
Blue Finance effectively finances marine-protected areas in Southeast Asia, an area often underfunded yet crucial.
CHALLENGES ON THE HORIZON
Investing in nature-based solutions, however, is not without its challenges and one of the main hurdles is the capacity gap in the teams behind these ventures, according to Choi.
"We often see that the management team doesn't really have the older veterans, necessary business skills or experiences, because a lot of them are founded by very young passionate founders who are driven by conservation or social issues," says Choi.
To address this, the RS Group and Terratai often take a hands-on approach with their investees, with some team members even stepping into roles such as CFO or COO to provide necessary guidance and leadership.
“Another challenge is the lack of flexible capital and risk tolerance in nature-based solutions,” she said.
Choi noted that it can take many years for these solutions to establish and scale their operations, requiring close relationships with local communities and government officials.
"I think we probably need more investors coming into the space having that risk tolerance and flexible capital," she said.
Despite these challenges, Choi is optimistic about the future. She believes that biodiversity, like climate change, will become a significant concern for asset owners in the coming years.
"I definitely, definitely think so," she said citing new EU deforestation regulations and the emergence of the Taskforce on Nature-related Financial Disclosures as key indicators of this shift.
Choi emphasised that, beyond the challenges and the policy shifts, nature-based solutions are about uncovering the wealth of resources that nature has to offer.
She highlighted under-appreciated commodities like the canarium nut and the illipe nut as examples of non-timber forest products that can be sustainably harvested from primary forests.
"There are so many treasures hidden in nature. And our role is to find them and commercialise them, and then provide enough sustainable livelihoods to the local community so that they don't need to cut down their forests,” Choi said.