As the financial impact of climate change from fires, droughts and floods becomes clearer, the urgency for an economic solution has never been greater, writes Peter Bachmann
In 2024, global warming propelled Earth to its hottest year on record. This is not just another statistic; it marks a defining moment in our struggle to curb rising temperatures.
This turning point, confirmed by the Copernicus Climate Change Service, signals the first time the world has breached the 1.5 degrees Celsius (2.7 F) warming limit established by the 2015 Paris Agreement.
With the true cost of climate change from fires, drought and floods now being better recognised, the need for an economic solution has never been more pressing.
2024 marked a significant year for several of sustainable infrastructure’s most promising sub-sectors. Nature investing emerged as a scalable new infrastructure asset class, echoing the renewable energy boom of two decades ago. At the same time, technological advancements have driven the viability of vertical farming initiatives.
While 2024 focused on honing the rationale and approach to investing in these themes, 2025 will shift investors’ focus toward effectively capitalising on these opportunities.
Nature Investing
Next year feels poised to mark the “Big Bang” for nature investing. To me, investing in nature today feels very similar to where renewables were 15 to 20 years ago and where infrastructure was 20 to 25 years ago. We are at the dawn of a significant new super cycle - one with immense potential to drive growth and deliver nature positive impact on a global scale.
The UK Government’s implementation of biodiversity net gain (BNG) legislation in February 2024 provided the regulatory clarity needed to unlock the potential of nature-based solutions as a scalable and impactful investment opportunity in England. When we began investing in this space in 2020, discussions around BNG often felt like an uphill battle - many dismissed it as overly niche or speculative. Today, we’ve come full circle.
The progress of our Environment Bank business has been highly encouraging. We now operate the largest national network of habitat banks and have secured over £200m (€239m) in demand in a matter of months from customers eager to purchase our BNG units. To date, we have successfully completed over 50 transactions with major companies, including National Grid, Panattoni, a leading warehouse developer, and Galliard Homes, a renowned property developer.
Many LPs we engaged with this last year have been evaluating how to position themselves in this space. Their interests range from securing forestry assets, to exploring emerging approaches like habitat banks and vertical farming. It will be fascinating to see how investors engage across this spectrum in 2025 to make meaningful and lasting impacts on natural capital.
Vertical farming
Significant advancements in technology and cost efficiencies, particularly around LED lighting and renewable energy, have made vertical farming initiatives increasingly viable.
To give a simple data point: for our first vertical farm with Fischer Farms (Farm One) in 2019, we invested approximately £2.5m on LED lights. Three years later, the lights for Farm Two cost about £1m - less than half the price - but Farm Two is 7 times larger than Farm One. That means, effectively, LED lights became around 15 times cheaper from 2019 to 2022.
In addition to cost reductions, we’ve seen a massive improvement in energy efficiency. Over the past six years, LED energy consumption has decreased by roughly 50-60%, while the lights themselves have become dramatically more affordable. These vertical farms also use about 95% less water and no pesticides whilst offering a longer shelf-life which further improve relative value.
This combination of falling costs for LEDs and renewable energy - contrasted with rising costs in traditional field-based farming - has fundamentally transformed the cost base for vertical farming. The macro trends are clear: technology is driving significant efficiencies that make vertical farming increasingly viable and competitive. At the same time, the impact of climate change and weather peril has finally put food security back squarely on all global agendas.
By continuing to leverage the rapid decline in production costs, we aim to achieve a ‘Levelised Cost of Salad’ at less than half the cost of field-grown crops within the next decade.
This progress also lays the groundwork for scaling production to staple crops such as soy, wheat, rice, and peas, which are crucial for alternative proteins. The next generation of alternative proteins, which combine sustainability benefits with the right price and nutrition levels, promises to be one of many transformative opportunities to redefine the use of scarce resources - a space we are closely monitoring as it evolves.
International expansion
A key focus for 2025 will be to explore the internationalisation of our strategy, with North America, the Middle East, and Europe emerging as priority regions for growth.
In Europe, we are looking at collocating vertical farms with solar and wind projects facing curtailment. By harnessing surplus power, we can create mutually beneficial partnerships with energy providers while ensuring a steady supply of green energy for our farms.
In the Middle East, energy costs are just a fraction - approximately 5% - of those in the UK. This affordability, combined with the region’s low rainfall and potential to integrate solar and wind energy assets into farming operations, positions it as a particularly attractive hub for vertical farming initiatives with the potential to export globally – four billion people are within four hours of the region.
Canada, on the other hand, offers a compelling combination of low renewable power costs and high produce prices. Its geographical proximity to the US market further enhances its appeal, making it an ideal location for sustainable farming projects and infrastructure investments.
This transformation underscores a broader trend in sustainable infrastructure, where innovation and resource optimization present investors with opportunities to align their portfolios to generate long-term productivity gains for the economy but also with meaningful environmental impact.
