Venture Capital Investment Opportunities in Biodiversity Markets

Abstract

A consumer-driven change in commodity markets has generated the birth of a number of emerging markets for products and services. These markets represent an alternative to traditional management of natural resources that have destroyed our biodiversity. Organic production, ecotourism, sustainable fisheries, sustainably harvested forest products,are all sectors with a positive link with biodiversity. The markets for these products and services have all emerged as a reaction to consumer demand, influenced by awareness campaigns, and have developed through the participation of independent certifiers. Biodiversity-linked markets are still small and informal in many ways. However, as this article will show, the number of participants, volumes traded and degree of institutional organization are growing at incredibly fast rates. In our opinion, these markets present interesting investment opportunities for current players in the markets, as well as for smart venture capitalists. We describe each biodiversity-linked market, the main players (producers, traders, certifiers and retailers), under what rules they operate, and why, in our opinion, they present interesting investment opportunities. We illustrate our argument with some example of investments undertaken through the fund management activities of A2R, specifically through the management of Terra Capital. 1