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HSBC Launches New Funds Targeting Niche ‘Natural Capital’ Industry, Hoping to Take It Mainstream

KEY POINTS

  • HSBC Global Asset Management and climate change advisory and investment firm Pollination Group are teaming up to launch a series of billion-dollar funds that will target “natural capital.” 
  • Natural capital means nature’s assets, including trees, oceans and soil.
  • The new venture, which will be called HSBC Pollination Climate Asset Management, is the largest of its kind. It will target institutional investors including pension funds and sovereign wealth funds.

HSBC Global Property Management and climate change advisory and financial investment company Pollination Group are collaborating to release a series of billion-dollar funds that will target “natural capital.”
The brand-new endeavor, which is the largest of its kind, will be called HSBC Pollination Environment Possession Management. The funds will target institutional investors including pension funds and sovereign wealth funds.

There are lots of energy and climate-focused funds on the marketplace, but what sets this brand-new partnership apart is its scale, as well as its concentrate on natural capital specifically. In the most basic terms, natural capital implies nature’s properties, consisting of trees, oceans, and soil.

Instead of buying a solar farm or innovation associated with energy storage, for instance, HSBC Pollination Climate Asset Management is targeting nature-generated assets. This consists of jobs tied to areas like regenerative farming practices and sustainable forest management.
John Morton, a partner at Pollination Group, said that the offer, which typically would have taken several years to create, was sealed in a matter of mere months and practically all of it over Zoom.

Pollination Group “is now seeking to take the ideas and the investment theses and deals that we have been seeing for several years and scale them up and really kind of turbocharge the focus on the natural capital expense,” Morton, who was a senior director for energy and environment under President Obama.

He hopes the partnership between large banks and a firm with competence in natural capital will pave the way for other financial investment cars concentrated on natural capital.

“It takes a big, very first-time substantial partnership like this to show the business viability of a possession class, and we are very confident that we are going to do that through this joint endeavor,” Morton included.
The collaboration statement comes as socially accountable investing continues to grow in value while drawing in a record amount of capital. In the public market, sustainable-focused funds saw inflows of $71.1 billion throughout the second quarter, pushing international assets under management in sustainable funds above $1 trillion for the very first time, according to information from Morningstar.

Incorporating sustainable investing was when believed to come at the expense of monetary efficiency, but Morningstar information also reveals that nearly two-thirds of these funds exceeded their conventional index-fund counterparts throughout the 2nd quarter.

“When it pertains to natural capital, you can have your cake and consume it too and I do not think that was the case 10 years ago,” Morton said. “However what we’ve seen is you understand the development of bankable markets in crucial natural capital sectors worldwide.”

According to a 2018 report from the World Wildlife Fund, nature represents a minimum of $125 trillion every year in worldwide economic activity. Increasingly more companies and banks are dedicating to climate objectives, but there are limited methods in which to deploy capital. This is the void HSBC Pollination Environment Property Management wants to fill.

Both firms will contribute monetary capital in addition to employees for the new venture. The very first fund, which is set to introduce next year, is targeting $1 billion, followed by a $2 billion carbon credit fund, although these numbers are not set in stone.
“We are assisting sort of leader this property class or a minimum of taking a property class which is quite small, to scale at a minute when it’s truly required by the institutional investor community, definitely needed by the world, and we feel we can create strong returns at the very same time,” Morton stated.

Still, one typical criticism of effect investing is that it can be hard to determine and quantify the actual effect, which is made all the more difficult by completing interests within the rapidly altering sustainable investing ecosystem.

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