Does anyone have experience in buying a nature/environmental business?

May 05, 2024

by a searcher in London, UK

I'm searching for a business in the nature or environmental space, especially in the UK, and I was interested if anyone has any experience.

Ideally, businesses which own nature and use carbon credits or biodiversity net gain credits to earn revenue, or alternatively environmental consulting companies.

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Reply by a searcher
from Loyola University Maryland in Sacramento, CA, USA

I spent about 2.5 years trying to build a startup in this space, and my main takeaway from the credits-as-revenue model is that it's incredibly difficult to underwrite from an investor's viewpoint. Even in CA (which arguably leads the US in carbon credit revenue generation possibilities) the "market price" of a credit is not at all established nor mature (and varies significantly based on a host of factors surrounding quality, longevity, and traceability), so revenue projections are meaningless, so the investor is forced to underwrite a substantial amount of unknown unknowns. This could be fundamentally different in the UK, but I don't think so.

The big headline numbers for credit-based investments have mostly centered around R&D technologies that allow for ESG investment targets to be hit, but not necessarily to produce long-term viable, carbon-negative solutions. I would stay away from any project whose viability rests on carbon or biodiversity credits at this stage, unless you're prepared to make an all cash offer with a corporate off-take agreement in place.

I've seen some really interesting biodiversity/animal welfare/agroforestry/regenerative farming plays that incorporate multiple revenue streams into very strong operations, but those require a good bit of localized ecological knowledge and more than a little work.

It's a shame too, because there's a massive opportunity in a variety of ecological restoration services. Happy to share more if you want to chat, just DM me here.

Environmental consulting, on the other hand, seems to be a great businesses from the regulatory capture it has, at least here in CA. Site surveys and environmental studies are required for just about every significant infrastructure project, so the business case for environmental consulting is definitely there in the US.

Reply by a searcher
in London, UK

Thanks for sharing Pete, and definitely the same risks for underwriting exist here as well. Loads of reports are written about it - but the market is moving in the right direction.

There's growing momentum towards natural capital as far as I can see, with some interesting possible plays around ecosystem services (especially disaster reduction). Also community co-investment and concessional capital can make for an interesting stack.

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