HSBC Global Asset Management has entered into a joint venture agreement with climate change advisory and investment firm Pollination Group, to create a natural capital asset manager.
HSBC Pollination Climate Asset Management will launch a $1 billion fund mid next year and will invest in areas including forestry, regenerative and sustainable agriculture, water supply, nature-based biofuels and natural ecosystems capable of storing carbon.
The duo hope to create “the world’s largest natural capital manager” and believe the JV is the first “large-scale venture to mainstream natural capital as an asset class,” a joint statement said.
“From HSBC asset management’s perspective, we’ve long been responsible investors … but we have not yet made any natural capital investments,” Melissa McDonald, HSBC Global Asset Management head of responsible investment told Agri Investor.
“We don’t have investments in forestry, or agri and this is why the partnership with Pollination is such a good fit for us, because our vision and cultures are really well aligned. They bring the expertise that we need in the area of natural capital and we combine that with our investment management expertise more broadly and client franchise global reach, so that’s the beauty of the partnership.”
Pollination was co-founded in late 2019 by the former head of Baker McKenzie’s global climate change practice Martijn Wilder and London-based investment banker Tony O’Sullivan.
McDonald said details around the structure of the $1 billion fund are yet to be finalized and will be informed by investor feedback. HSBC will be a cornerstone investor in the fund – McDonald added that the size of the commitment will be dictated by the eventual overall size of the vehicle.
HSBC Pollination also plans to launch a $2 billion carbon credit fund, which will invest in areas such as rain forests, reef systems, mangroves and offshore seagrasses, all of which are capable of storing carbon.
The fund will seek to service the substantial need for carbon offsets among global corporates, which have limited avenues they can pursue to access this, according to Wilder.
“The general thematic of the joint venture is to enhance the natural capital of the world and you can do that as well as get a carbon return at the same time,” Wilder told Agri Investor.
“By valuing nature, providing a value on that and by investing in that project upfront … you’re financing the development of that project in order to get the long-term returns. Carbon [gives you] an economic return and a commodity, [there is an underlying] asset, as well as the broader biodiversity, improved fisheries and wildlife.”