Biodiversity investing is proving resilient rather than buoyant, with demand anchored by a core group of long-term institutional allocators. Adrien Cambonie, portfolio manager at Union Bancaire Privée (UBP), the Geneva-based private bank specialising in wealth and asset management, said flows alone do not capture the full picture.
“We have attracted a stable base of dark green institutional investors who are aligned with the purity of that approach,” Cambonie noted, pointing to sustained engagement from asset owners even where mandates take time to materialise. Biodiversity, he added, is emerging as “the next major sustainability theme after climate”, supporting a constructive demand outlook.
Cambonie distinguishes biodiversity from traditional ESG by its focus on outputs rather than processes. ESG assesses how companies operate, while biodiversity investing targets firms whose products directly address environmental challenges.
This creates a differentiated risk return profile and sector bias, with structural overweight to industrials such as water treatment and resource efficiency, and underweight to technology. He said this leads to “a different composition of risk” rather than higher volatility, alongside exposure to long-term growth drivers including regulation and innovation.
Water is central to that opportunity set. Tightening standards around pollution and chemicals such as PFAS are driving multi-year investment cycles. Cambonie argued that while some large-cap names reflect these tailwinds, “the full breadth or duration is not fully priced”, particularly across enabling technologies and services.
Regulatory frameworks such as the Clean Water Act in the US provide visibility, while demand is broadening due to pressures from sectors including data centres and agriculture.
In portfolio construction, biodiversity strategies are typically used as satellite allocations. Their high active share and limited overlap with benchmark-heavy indices offer diversification benefits, particularly as investors reassess concentration in mega-cap equities.
Cambonie said such strategies “can offer diversification benefits at a time when many investors are reassessing concentration risk in core holdings”.
Ultimately, conviction hinges on recognising biodiversity as a structural theme. Investors who maintain exposure focus on fundamentals such as regulatory direction, resource scarcity and corporate integration of nature-related risks. Cambonie warned against reacting to short-term sentiment, arguing that “the better discipline is to assess whether the underlying companies are benefiting from durable drivers”.
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