Existing investors in nature across six countries sense an emerging opportunity to boost their nature portfolio size, although political concerns may hinder the follow-through, a report published by an advisory firm on Wednesday has suggested.
The study, conducted by climate and nature advisory firm Pollination, said that more than two-thirds (69%) of investors already engaged in nature-related investments are looking to increase their portfolio in the space.
“Investing in the natural world is investing in the resilience of the economy,” said Martijn Wilder, CEO of Pollination.
Wilder added: “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.”
Wilder underscored the need for a substantial and sustained enhancement of capabilities across capital markets to drive the transformation towards a more sustainable global economy, advocating for a restoration of nature.
The report released on Wednesday revealed the perspectives of 557 institutional investors across six key jurisdictions: the UK, USA, Australia, France, Singapore, and Japan. These investors represent a diverse cross-section of the global fund management industry, with a significant number managing over $100 billion in assets, Pollination said.
According to the report, 87% of US investors intend to bolster their investments in nature, despite considerable polarisation on sustainable and responsible investment, closely followed by Singapore (79%) and Australia (76%).
In Europe, investors in France and the UK also differ by driving factors of nature-related investments, according to the report. French investors are the second-most likely to be driven by environmental outcomes, behind Australia, whereas UK investors are more likely to prioritise returns. UK investors are least likely to respond to activist pressure, with only 16% highlighting this as a driver of their engagement with nature.
Three-quarters (75%) of private equity firms and 72% of insurance and reinsurance firms plan to increase their investments in nature. The research also said 67% of asset owners in insurance/reinsurance already have dedicated nature investment teams.
However, 90% of respondents said the rising politicisation of ESG is impacting their desire to invest further in nature.
Many investors are looking for both returns and impact when they make investments in nature, but 23% – the second-most popular answer – said they were primarily motivated by improving environmental outcomes.
Despite the shared goal of increasing investments, the perception of risks varied globally. Private Equity and Alternatives were identified as the most exposed asset class in the UK, while Agriculture and Forestry are more exposed to nature-related risk in the US and Australia, the research said.
By Tom Woolnough – tom@carbon-pulse.com
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