Nature: an asset class of its own?

Date: 04 Oct 2023

Ashleigh John

Global climate and nature advisory and investment firm Pollination has released a report outlining the significant journey that the private sector’s relationship with nature has undergone over the last fifty years. Could the future see nature-related investments evolve into an asset class of their own?

The report, The Nature Finance Focus: Tracking global trends in nature investment, surveyed 557 institutional investors, 332 of which manage over $100bn in assets under management, in six key jurisdictions: Australia, Singapore, Japan, France, the UK and the USA. The report revealed that over two-thirds of investors intend to increase their investments, with three-quarters believing that nature-related investments will evolve either entirely or partially into an asset class of their own.

Of the investment firms surveyed in the six jurisdictions, 69% said they plan to increase their investments in nature. The USA is leading the charge, with 87% set to increase nature investments, despite the significant polarisation on sustainable and responsible investment in that market. The report notes that perceptions of risk differ globally, with PE and Alternatives seen as the most exposed asset class in the UK, compared to Agriculture and Forestry in the US and Australia. The impact of activist pressure also ranges across the world.

60% of investors globally cited returns as their highest motivator, with impact coming in second. UK investors were the least likely to highlight improved nature outcomes as a primary motivator (only 19%) and were the most likely to highlight short-term returns as a singular motivator (22%). UK investors were also least likely, compared to the other jurisdictions surveyed, to highlight activist pressure as a driver of their engagement with nature (16%). This compares starkly to Singapore investors, as 50% gave the same answer. However, UK investors did report higher exposures to nature-related investments compared to counterparts in other markets, with 47% of UK investors having investments with nature-based solutions, compared to 40% in France.

Martijn Wilder, Co-founder and CEO, Pollination commented: “Investing in the natural world is investing in the resilience of the economy. It’s clear that investors across the globe are starting to recognise the potential nature-related investments have for producing returns as well as reducing systemic risk, alongside protecting and improving the natural environment. But we need much more: a significant and sustained build in capability across capital markets is needed, including skills and human capital, information infrastructure and new models and norms. We need to continue to transform our global economy to avoid further damage and begin to restore nature. This has long been Pollination’s vision, and our findings in this report reinforce our hope and determination to support global capital markets on this journey.”

Martijn Wilder continued: “The TNFD’s final framework marks another step in the journey towards a nature positive future, one which will be material for companies and investors. It further clarifies the path for investors to integrate nature-related risks and opportunities into their strategies. We need to recognise this as a watershed moment; for both systems-level change, and for the nations and institutions working to transform our relationship with nature.”

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