August 26, 2020

By Lynda Kiernan, Global AgInvesting Media

Pollination Group Holdings Limited, an Australian specialist climate change advisory and investment firm, has partnered with HSBC Global Asset Management Limited on a joint venture to launch HSBC Pollination Climate Asset Management – what will be the largest natural capital manager in the world, and the first large-scale venture to mainstream natural capital as an asset class. 

GAI News had the privilege to speak with Martijn Wilder, co-founding partner of Pollination, to learn more about the venture, its vision for its funds, and the natural capital investment space. 

Wilder explained, “The partnership brings together Pollination, which is a new specialist firm in climate change and investment advisory firm with a lot of people in that business that have a deep, deep expertise in the space – 20-plus years in this area, with HSBC, who are a global asset manager with a lot of funds under management all over the world.”

“We actually came up with the idea at the start of COVID-19, and we negotiated the entire process on Zoom. So what would normally take a long time, we’ve done in record time, over nine-to-ten weeks.” 

“It was a pretty remarkable effort,” continued Wilder, “and it speaks to the strength of the partnership. And what we’ve found with COVID, there’s challenges to the global economy, and I think one of the important lessons that we’ve been finding is that institutional investors, and others, have turned their minds to making things more sustainable, and the realization that what we do needs to be done in a much more sustainable way.”

Both HSBC Global Asset Management and Pollination will  provide resources to the independently operating venture, which through the creation of private funds, will offer investors a wide exposure to global natural capital themes including regenerative and sustainable agriculture, sustainable forestry, water supply, blue carbon – that is, carbon captured by oceans and coastal ecosystems – nature-based biofuels, and nature-based projects that generate returns from reducing greenhouse gas emissions.

Created with the intent of attracting large-scale investment into natural capital assets from sovereign wealth funds, pension funds, institutional investors, and insurers, the proposed group of funds will be launched with a debut fund in mid-2021. HSBC plans to be a cornerstone investor in this initial vehicle which will be looking to raise up to $1 billion. A second carbon credit fund is to follow, with a funding goal of up to $2 billion.

This capital will be deployed across both emerging and developed markets in a diverse range of projects that will preserve, protect, and enhance nature over the long-term. In support of this goal, the partnership will provide stewardship and evaluation of the investments that are made, giving investors the ability to quantitatively measure their impact.

This quantification will be determined through parameters of the partnership’s own design, explained Wilder, who told GAI News, “One of the challenges with natural capital evaluation is that it hasn’t been done very much, and where it has been done, it’s been pretty limited.”

However, Wilder noted that there are certain regulatory regimes within particular jurisdictions that allow for the valuation of nature specifically, and have protocols in place – and programs in existence through which you can generate soil carbon using established methods, and the government pays you for doing it. So by targeting these jurisdictions and programs, the fund can gain additional nature-based value. 

“Our team has done a lot of work in Australia, for instance, with the Wentworth Group and others where we’ve had to develop metrics for valuing nature,” said Wilder

“There are only a few regulatory regimes around the world where this has been done. In Australia, in Queensland, they have the Land Restoration Fund – a government fund that buys both carbon as well as biodiversity and nature-based credits, and so, in that scheme they had to develop an approach to valuing nature. There are a few other programs that value eco and its services around the world, but it’s a pretty nascent area.” 

Although nascent, the growing awareness of sustainable investing reflects an increasing need that has been demonstrated by the ever-greater capital being committed to the space. This is evidenced by investment in sustainable infrastructure projects increasing by approximately three times over the period between 2010 and 2018 to reach US$31 trillion on a global scale, according to a statement released by Pollination and HSBC.

“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.”

Wilder also noted that since the signing of the Paris Agreement, which went into force on November 4, 2016 – originally ratified by 55 countries responsible for at least 55 percent of global emission, and growing to be ratified by 125 countries by early 2017, and 189 today – talk among governments and funds has spread of the need to value nature and to do things more sustainably.

However, a challenge is that everyone wants to invest in nature, or in agriculture to get additional returns through impact, but they’re only now working out how to do that. 

“To reach the goals set in the Paris Agreement we need to originate and fund new approaches that protect nature, at scale,” said Wilder. “In a global economy that is on a path to rapid decarbonization, we regularly hear from investors and organizations looking for investment opportunities that will mitigate long-term climate risk.”

“In natural capital, we’re accelerating investment in an asset class that can help combat climate change and build biodiversity, whilst also generating long-term returns for institutional investors. Investing in the resilience of nature is investing in the resilience of the economy. Nature is the most fertile investment we have.”

– Lynda Kiernan is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, and HighQuest Group’s Oilseed & Grain News. She is also a contributor to the GAI Gazette. She can be reached at lkiernan@globalaginvesting.com.