HSBC sets sights on ‘natural capital’ in new asset management JV with climate advisory Pollination
HSBC Global Asset Management is making its first foray into ‘natural capital’, with plans to launch a new asset management firm dedicated to investing in natural assets in partnership with specialist climate change advisory and investment firm Pollination.
The aim is to create the “world’s largest natural capital manager”, which will be known as HSBC Pollination Climate Asset Management, subject to regulatory approval. Industry veteran Christof Kutscher will sit at the helm as executive chairman of the joint venture.
Natural capital refers to the world’s natural assets, such as soil, air, and water. Investment strategies geared toward natural capital tend to focus on projects in areas such as sustainable agriculture, regenerative forestry, and water supply.
In addition to these areas, the joint venture is interested in ‘blue carbon’ projects, which concentrate on the carbon captured by oceans and coastal ecosystems, as well as bio-fuels, and “nature based projects that generate returns from reducing greenhouse emissions”.
Speaking to Institutional Asset Manager, Melissa McDonald, head of responsible investment at HSBC Global Asset Management, says the goals of the Paris Agreement motivated the asset manager to join the venture.
“We need to act now. The world’s biodiversity is under serious threat so we cannot wait. We think that investing in natural capital and mainstreaming it as an asset class to allow more investors to access it will have a huge positive impact on the planet,” says McDonald.
“To reach the goals set in the Paris Agreement we need to originate and fund new approaches that protect nature, at scale,” adds Martijn Wilder AM, co-founding partner at Pollination. “Investing in the resilience of nature is investing in the resilience of the economy. Nature is the most fertile investment we have.”
The venture expects to launch its first fund by the middle of 2021. The firm hopes to raise up to USD1 billion from sovereign wealth funds, pension funds and insurers, as well as having HSBC as a “cornerstone investor”.
“In a global economy that is on a path to rapid decarbonisation, we regularly hear from investors and organisations looking for investment opportunities that will mitigate long-term climate risk,” says Wilder.
HSBC Global Asset Management’s CEO, Nicolas Moreau, says the initiative is “designed to help [clients] achieve a financial return, while at the same time creating a positive impact on the world’s biodiversity which will be felt for generations to come”.
The funds will follow an investment process “similar to that of private equity”, providing stewardship and evaluation of the investments so that investors can quantitatively measure impact.
The joint venture also expects to launch a second carbon credit fund at up to USD2 billion.