HSBC Global Asset Management Limited and Pollination Group Holdings Limited have agreed to create a natural capital manager in a venture to mainstream natural capital as an asset class.
Martijn Wilder, co-founder Pollination Group
HSBC Pollination Climate Asset Management “aims to offer investors a wide exposure to global natural capital themes in both emerging and developed markets.” The joint venture asset management firm is subject to regulatory approval.
Pollination Group Holdings is a specialist climate change advisory and investment firm founded by climate and legal expert Martijn Wilder. HSBC Pollination Climate Asset Management will focus on creating private funds to attract capital from institutional investors including sovereign wealth funds, pension fund and insurers.
Sustainable investment in natural capital provides exposure to projects focused on nature including sustainable forestry, regenerative and sustainable agriculture, water supply, blue carbon (carbon captured by oceans and coastal ecosystems), nature based bio-fuels, or nature based projects that generate returns from reducing greenhouse emissions.
“Investors can get good economic returns from the regenerative agriculture, sustainable fisheries and sustainable forestry,” Wilder said. “As the other areas develop over time, as you get backing for projects, you can move more capital into those areas and build them out over time.”
Sustainable investing represents a growing need and has demonstrated continued growth in recent years, with capital invested in sustainable infrastructure projects increasing three-fold between 2010 and 2018 to around US$31 trillion globally, HSBC noted.
“We have been working on identifying a large pipeline of assets that exist,” Wilder said. “The ones that we have identified are will be investments that have a normal return. We will be enhancing that return through ensuring there are natural capital values that come with it. In some markets that means carbon, biodiversity, and water credits, and we’ll be doing that.”
The joint venture will also provide stewardship and evaluation of the investments, enabling investors to quantitatively measure impact.
“One of the plans is to develop innovative finance structures to value biodiversity,” Wilder said. “There are innovative ways to finance biodiversity and create vehicles, so we are looking at ways to create that work.”
Wilder pointed to a 2016 International Finance Corporation US$152 million Forest Bond that was developed to prevent deforestation in developing countries as an example of past work. The Forest Bond was developed with FC developed the Forests Bond with BHP and Conservation International. Pollination worked with BHP and Conservation International as part of the process.
The first fund, which aims to launch mid next year, will look to raise up to US$ 1 billion followed by a carbon credit fund at up to US$2 billion. HSBC intends to become a cornerstone investor in the first fund. The funds will invest in a diverse range of projects that will preserve, protect and enhance nature over the long-term.
“Clients are increasingly focused on environmental matters and this initiative is designed to help them 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,” said Nicolas Moreau, global CEO, HSBC Global Asset Management. “Through solutions such as this, we’re helping clients achieve their long-term investment objectives, while meeting their increasing demand to actively contribute to a more sustainable world.”
HSBC Global Asset Management and Pollination will both provide resources to the planned joint venture and it will operate independently.
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