HSBC signs up for new $1bn natural capital investment fund
HSBC has partnered with Pollination to launch what it is describing as the first large-scale investment fund focused solely on nature conservation and restoration.
The fund, due to launch next year, will aim to raise $1bn to finance “a diverse range of activities that preserve, protect and enhance nature over the long-term, and address climate change”.
Included in this cohort of activities are projects seeking to restore coasts and forests; promote sustainable forest management and agriculture; protect wildlife and biodiversity, and boost carbon sequestration in marine and terrestrial habitats. Efforts to make fisheries more sustainable and to scale up regenerative models of agriculture will also receive funding.
Pollination said that it will evaluate each investment opportunity “against high environmental standards” to ensure that the portfolio delivers lasting positive environmental impact, without unintended negative consequences. This process will take several months and the potential for value creation, carbon sequestration and biodiversity benefits will be disclosed to prospective investors.
HSBC will become the first investor in the find and will encourage other organisations to follow suit. Should the initiative prove successful, Pollination has said that it will launch a carbon credit fund of up to $2bn, having already secured backing from HSBC. The fund would scale up nature-based carbon mitigation and sequestration projects.
“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,” HSBC Global Asset Management’s chief executive Nicolas Moreau said.
The announcement of the new fund comes shortly after the UK Government launched the first phase of its natural capital investment pilot scheme, funnelling funding millions of pounds towards four local projects which aim to restore wetlands and peatlands, reduce nitrate pollution and boost flood resilience.
The Government committed £10m in the Budget to support natural environment projects and to attract extra investment from 2021, through the Natural Environment Impact Fund. A further £5m has been allocated to the development of a natural capital assessment framework, intended to improve the data collection of how nature and biodiversity are used within the UK.
These moves come as the UK Government is participating in efforts to create a Task Force for Nature-related Financial Disclosures (TNFD), along with 10 major banks, the swiss government, WWF and Global Canopy.
Elsewhere, the global market for ‘blue finance’ is expanding alongside the market for terrestrial nature-based climate solutions. Credit Suisse partnered with The World Bank to issue a $28.6m (£22.2m) bond aimed at financing the protection and restoration of fresh and saltwater resources and habitats late last year, building on The World Bank’s first water and ocean stewardship bond in 2018.
The UN is currently working to develop a Paris-style deal for nature, uniting nations and states in averting the Earth’s sixth mass extinction. At present, the draft deal would require 30% of the world’s habitats to be restored. According to a joint piece of research from more than 100 economists and scientists, meeting this target would deliver a $50bn boost to the global economy, with nations reaping economic benefits five times greater than the initial costs of conservation and restoration.
As for HSBC, the announcement comes as the bank is facing climate protests from the Sunrise Movement and Brandalism. HSBC has, according to the Funding Climate Chaos report, invested £67bn in fossil fuels since 2015. According to a separate report from NGO 350.org, HSBC is the second-highest fossil fuel financer in Europe, behind Barclays. The bank announced in April 2018 that it would “stop financing new coal-fired power in all countries around the world”, excluding Bangladesh, Indonesia and Vietnam.