Lombard Odier, a Swiss private bank that recently entered SA, is among the founding members who on Monday announced a new asset management venture focused on putting value on natural resources such as water, soil and the environment.
Other members of the alliance, which seeks to raise as much as $10bn by 2022 in the nascent investment category, are HSBC Pollination Climate Asset Management and private equity group Mirova.
For investors it heralds the beginning of a new investment category that aims to mobilise allocations from the globe’s estimated $120-trillion investment pool to companies that harness or preserve nature. It also comes at a time when funds are looking to invest in projects that help protect the world’s biodiversity while turning a profit at the same time.
“Natural Capital is a profound asset. It refers to many things that have tremendous value but no price and include things like soil, water, biodiversity, and biomass that sustain human life on earth. While we have greatly diminished it, we estimate natural capital contributes to approximately half of world GDP,” says head of sustainable investment, research, and strategy at Lombard Odier, Christopher Kaminker.
Examples include the clean air all humans breathe, a “free” resource made possible by huge tropical rainforests in South America and Central Africa that act as the lungs to the planet.
While the implementation of carbon pricing is beginning to entail compensation to landowners for preserving these vital assets, the ability to generate financial and economic returns from processes in which there are no explicit costs remains a challenge.
“Bees don’t send invoices. But perhaps they should, because they provide $600bn worth of value when pollinating crops,” Kaminker says with reference to the insect’s role in ensuring staple crops, and by default, food security.
Even traditional investment categories such as real estate generate much of their value from the aesthetic qualities of mountains, oceans and beaches, all provided by nature, Kaminker points out.
The 220-year-old Swiss private bank Lombard Odier launched its first fund to invest in publicly traded companies dedicated to the strategy in 2020. It now has more than $400m in assets under management.
Far from being passive, the new strategy will support innovative companies that build skyscrapers from wood and motor cars from organic materials, among many others. In the portfolio are companies that recycle materials, maximise efficiency in production (such as 3D printer manufacturers) or rehabilitate and reforest arid or damaged land.
The alliance was announced by the Prince of Wales at the One Planet Summit under way in Nice, France and was conceived under the umbrella of his broader Sustainable Markets initiative. Prince Charles pointed to nature’s ability to solve many of the problems the planet is facing from pollution, illness and disease, and sustainability.
“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,” the British prince said.
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