As wildfire, storms, floods and droughts become an increasing source of worldwide economic stress, some big investors are betting that creating economic solutions for nature’s biggest problems will emerge as the next asset class.HSBC Global Asset Management Ltd. and climate change-focused investment firm Pollination Group Holdings Ltd. announced Wednesday the launch of a joint venture to form what they’re calling the world’s largest “natural capital” manager.
The firms aim to raise $6 billion from institutional investors, including pension funds, sovereign wealth funds and insurers, for sustainable forestry, regenerative agriculture, nature-based biofuels and other projects that reduce carbon dioxide, generate carbon credits, and “preserve, protect and enhance nature.” The venture plans to start its first $1 billion fund next year, and follow that with a $2 billion carbon credit fund to meet the growing demand from companies and investors to offset their carbon footprints.“Natural capital is just a way of thinking about nature as an asset that provides a flow of services and benefits to people and the economy,” said John Morton, a former climate director in the Obama Administration who is a partner at Pollination. “We see the devastation that is brought through poor natural capital investments, so investing in nature has to be part of the solution to our climate challenge.”Christof Kutscher, the global chairman of Axa Investment Managers and a senior adviser at Pollination, will serve as executive chairman of the new venture, and HSBC and Pollination will contribute financing and employees.Jonathon Porrit, a writer and environmental activist from the U.K., popularized the idea that businesses rely on five types of capital: natural, social, financial, human and manufactured. While natural capital can seem invisible to the corporate world, nature’s systems, including forests, oceans, rivers and wildlife, provide services to the global economy of about $125 trillion a year, according to a World Wildlife Fund report.Investments in areas like regenerative agriculture were miniscule just a few years ago and now they “have proven they can increase crop yields, while preserving and sequestering carbon,” Morton said.
“Investing in the resilience of nature is investing in the resilience of the economy,” Morton said.
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