Seizing Natural Capital Opportunities

HSBC Pollination Climate Asset Management, Lombard Odier and Mirova, an affiliate of Natixis Investment Managers, are the three founding partners of the Natural Capital Investment Alliance established by His Royal Highness The Prince of Wales under his Sustainable Markets Initiative. The Alliance aims to accelerate the development of Natural Capital as an investment theme and to engage the USD 120 trillion investment management industry and mobilise this private capital efficiently and effectively for Natural Capital opportunities.

As the world continues to tackle the twin climate and biodiversity crises, there is growing interest in investing in harnessing and preserving Natural Capital as a solution to reducing emissions, restoring biodiversity, and boosting sustainable economic growth and job creation.  However, despite the fact that half of global GDP depends on Natural Capital, there are currently only a limited number of initiatives to promote Nature as an investment opportunity. To seize the scale of this opportunity, a finance-led approach is needed to integrate Natural Capital as an investment theme across different asset classes, as well as improved investor-centric descriptions of Natural Capital investment opportunities. That is the purpose of this newly formed Alliance.

The three founding partners – HSBC Pollination Climate Asset Management, Lombard Odier and Mirova – are established pioneers in Natural Capital investing that have launched or developed specific vehicles or strategies for investments in Natural Capital.

HSBC Pollination Climate Asset Management, a joint venture between HSBC Global Asset Management and specialist climate change advisory and investment firm Pollination, has established a series of Natural Capital funds, directly investing in the preservation, protection and enhancement of nature.

Lombard Odier launched a first-of-its-kind global equities investment strategy for Natural Capital last year, directly inspired by His Royal Highness the Prince of Wales and developed in partnership with the Circular Bioeconomy Alliance, established under his Sustainable Markets Initiative.

Mirova has established a Natural Capital platform proposing strategies in the field of land restoration, blue economy and forest protection with more than 30 experts.

The Natural Capital Investment Alliance aims to attract members from the finance community to create scale, and synergistic bridges between mainstream asset owners and asset managers, underpinned by the following goals:

  • To mobilise USD 10 billion towards Natural Capital themes across asset classes by 2022.
  • To serve as a central hub for global corporations and financial institutions seeking to scale-up their investments into Natural Capital, in support of biodiversity restoration, including through Carbon Offsets. 
  • To share investment knowledge and expertise to help mainstream the Natural Capital investment theme and demonstrate scalability of appropriate vehicles and the multiple opportunities across asset classes. 

“The interdependence between human health and planetary health has never been more clear.  For so many of the problems we face, Nature, with the benefit of billions of years of evolution, has already provided us with the solutions.  But time is fast running out and we are rapidly wiping out, through mass extinctions, many of Nature’s unique treasure trove of species from which we can develop innovative and sustainable products for the future. As we urgently seek to rescue the situation, we must now look to invest in Natural Capital as the engine of our economy.

It is also why I have created a Natural Capital Investment Alliance to help us arrive at a common language on Natural Capital Investment so that we can start putting money to work and improve the flow of capital.”

His Royal Highness The Prince of WalesSpeaking at the One Planet Summit

“At Lombard Odier, we develop solutions that allow mainstream investors to position capital to benefit from this untapped investment opportunity. We are proud to be founding members of this important Alliance, inspired by His Royal Highness’ vision, and to contribute to mobilising capital at a scale commensurate with the opportunity and challenges.”

Hubert Keller, Managing Partner of Lombard Odier Group

“Mirova’s ambition is to continue the growth of the Natural Capital investment thematic and support the development of a nature positive economy. By mobilizing 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.”

Philippe Zaouati, CEO of Mirova

This week, HSBC Investors looking for environmental, social and governance (ESG) strategies have been handed a new group of indices promising to focus on biodiversity by excluding companies found to pose a threat to nature. The Euronext ESG Biodiversity Screened Index Series was launched on Tuesday Nov 23 by HSBC Holdings plc, which developed the product together with Euronext NV and Iceberg Data Lab SAS.

Iceberg Data Lab is a fintech firm that develops assessment tools and provides environmental data solutions to financial institutions. Increasingly, stakeholders are demanding greater accountability from financial institutions about the impact of their portfolios on the environment. With this index, tThe idea is to bring liquidity to a key corner of ESG investing seen as vital to protecting the planet.

HSBC, which says the indices it helped develop are the first to offer investors an opportunity to screen for biodiversity risks, has promised to put between US$750 billion and US$1 trillion towards decarbonisation and climate protection initiatives by the end of the decade.

Companies featured in the indices are selected from either the Euronext Eurozone 300 Index or the Euronext World Index. They must be committed to the UN Global Compact Principles; not be involved in controversial weapons, tobacco production, or thermal coal extraction; be ESG risk-assessed by Sustainalytics; and have their corporate biodiversity footprint or CBF calculated by Iceberg Data Lab. Iceberg’s approach looks at the whole value chain (in other words accounting for Scope 1, 2 and 3 emissions) to determine a firm’s biodiversity impact.

To attract more capital, HSBC is already planning to add a number of offerings to the indices, including derivatives and structured finance products, Kondarjian said in an interview.

“We are helping to develop business and investment models for enterprises that are finding ways to restore, manage and protect nature. Biodiversity and ecosystems provide value to society in a myriad of ways, such as food security, medicine, clean water, carbon removal and weather regulation. The decline in natural capital has been rapid and ongoing.”

Marine de Bazelaire, HSBC’s group adviser on natural capital

Post Author: Wealth Monaco