Natural capital at centre of new USD10 billion investment alliance
Three early adopters of natural capital investing – HSBC Pollination Climate Asset Management, Lombard Odier and Mirova – have come together to form a new alliance dedicated to growing natural capital as an investment theme.
Natural capital refers to the world’s natural resources, such as forests and rivers, on which it has been estimated that half of all global economic output depends.
The Natural Capital Investment Alliance made its debut at the One Planet Summit, as part of the Sustainable Markets Initiative developed by the Prince of Wales.
Speaking at the One Planet Summit, The Prince of Wales said that “time is fast running out” to address the twin climate and biodiversity crises.
“As we urgently seek to rescue the situation, we must now look to invest in Natural Capital as the engine of our economy.”
By 2022, the alliance aims to have put USD10 billion towards natural capital themes across asset classes, as well as scaling up the budding investment theme by engaging and working with the USD120 trillion investment management industry.
Investment management firm Lombard Odier launched a global equities investment strategy for natural capital in 2020, which raised USD400 million in seed capital on its launch.
“The investment industry seeks returns as its primary objective and today some of the most convincing opportunities for growth and returns come from a transition to a more sustainable economic model that both harnesses and preserves nature,” says Hubert Keller, managing partner of Lombard Odier Group.
The Natural Capital Investment Alliance also aims to serve as a central hub for global corporations and financial institutions seeking to scale-up their investments into natural capital, including through carbon offsets.
Philippe Zaouati, CEO of Mirova, says protecting natural capital represents a “global challenge but also a real opportunity”.
An affiliate of Natixis Investment Managers, Mirova has a natural capital platform offering strategies in the areas of land restoration, blue economy and forest protection.
“By mobilising more investors, including pension funds and insurance companies, significant financial assets can be deployed to support those businesses able to generate both attractive returns and tangible environmental and social impacts. Through this approach, the Sustainable Development Goals can be within reach,” Zaouati concludes.
In the past, there has been a lack of investment opportunities in natural capital at a large enough scale, which has meant that environmentally-focused investors have instead bought into renewable energy projects.
However, the World Economic Forum recently found that putting three major sectors of the economy onto a ‘nature-positive’ path could create USD10 trillion of economic growth and generate 395 million jobs by 2030. They noted that it would require a total investment of USD2.7 trillion annually to capture all the opportunities.
Meanwhile, HSBC Pollination Climate Asset Management was launched last year as a joint venture between HSBC Global Asset Management and specialist climate change advisory and investment firm Pollination, to invest in preserving nature. Its first fund has yet to launch, and aims to raise up to USD1 billion, followed by a USD2 billion carbon credit fund.
Christof Kutscher, the firm’s executive chairman, says: “We recognise nature is capital. Over the century, we have depleted nature creating possibly our biggest challenge to date. It is high time to take action at an unprecedented speed and scale. Investing in nature is a major investment opportunity, and the one action we must urgently take to protect our future.”
At the same summit, the Prince of Wales also unveiled the Terra Carta, a new sustainable finance charter.
Many of the world’s largest asset managers, including BlackRock, Fidelity International, and Schroders, have already pledged support for the charter, which includes voluntary commitments around climate, bio-diversity and desertification.