A new alliance of investors and energy sector giants will see $US10 billion (A$12.9 billion) invested in natural capital opportunities under the banner of a newly formed Natural Capital Investment Alliance, a Sustainable Markets Initiative brought together by His Royal Highness Charles, The Prince of Wales.
The new Natural Capital Investment Alliance was created with HSBC Pollination Climate Asset Management, Lombard Odier, and Mirova as its founding partners, and aims to accelerate the development of natural capital as an investment theme.
The new Alliance will seek to engage the $US120 trillion (A$154 trillion) investment management industry and mobilise this private capital efficiently and effectively to support natural capital opportunities.
Defining “natural capital” can be difficult. The Natural Capital Coalition defines natural capital as “another term for the stock of renewable and non-renewable resources (e.g. plants, animals, air, water, soils, minerals) that combine to yield a flow of benefits to people.”
Similarly, Mirova – one of the Alliance’s three founding partners – defines natural capital as “nature-based solutions” that include projects “that combine profit with purpose” such as “ecosystem conservation, restoration and sustainable livelihoods for local communities.”
As such, according to the Alliance’s own statement, the aim is to begin “investing in harnessing and preserving Natural Capital as a solution to reducing emissions, restoring biodiversity, and boosting sustainable economic growth and job creation” as part of efforts in tackling “the twin climate and biodiversity crises”.
Considering that half of global GDP currently depends on natural capital in some form, there are nevertheless only a limited number of initiatives currently promoting natural capital as a viable investment opportunity.
Which is where the new Natural Capital Investment Alliance comes in. The Alliance believes that a finance-led approach is needed to integrate natural capital as an investment theme across different asset classes. Further, the Alliance sees a need for improved investor-centric descriptions of natural capital investment opportunities.
“The interdependence between human health and planetary health has never been more clear,” said His Royal Highness The Prince of Wales, speaking at the One Planet Summit, which saw at least 50 countries – though not including Australia – commit to protecting 30% of the planet in an effort to halt species extinction and address climate change.
“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,” continued His Royal Highness.
“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.”
The unveiling of the Natural Capital Investment Alliance comes after His Royal Highness unveiled the Terra Carta (Earth Charter), a roadmap to 2030 for businesses to move towards an ambitious and sustainable future.
“The ‘Terra Carta’ offers the basis of a recovery plan that puts Nature, People and Planet at the heart of global value creation – one that will harness the precious, irreplaceable power of Nature combined with the transformative innovation and resources of the private sector,” said His Royal Highness, speaking again at the One Planet Summit held in France on January 11.
Joining His Royal Highness are the Alliance’s three founding partners HSBC Pollination Climate Asset Management, Lombard Odier, and Mirova, existing giants in natural capital investment that have already launched or developed specific vehicles or strategies for investing in natural capital.
For example, HSBC Pollination Climate Asset Management is a joint venture between HSBC Global Asset Management and the Australian-based specialist climate change advisory and investment firm Pollination Group. HSBC Pollination has already established a series of natural capital funds served at directly investing in preservation, protection, and the enhancement of nature.
“We recognise nature is capital,” explained Christof Kutscher, Executive Chairman of HSBC Pollination Climate Asset Management.
“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.”
Independent Swiss banking group Lombard Odier has similarly launched in 2020 a “first-of-its-kind” global equities investment strategy which was directly inspired by the Prince of Wales and developed in partnership with the Circular Bioeconomy Alliance, established under his Sustainable Markets Initiative. Meanwhile, French financial services company Mirova has established its own natural capital platform proposing strategies in the field of land restoration, blue economy, and forest protection.
“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,” said Hubert Keller, Managing Partner of Lombard Odier Group.
“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.”
“Natural capital protection and restoration represent a global challenge but also a real opportunity,” said Philippe Zaouati, CEO of Mirova.
“By joining forces with pioneering financial partners under the leadership of HRH The Prince of Wales, 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.”