On Thursday, HSBC Global Asset Management and Pollination Group Holdings announced a joint venture, HSBC Pollination Climate Asset Management, which is being positioned as the world’s largest manager of “natural capital.”
The joint venture pairs the financial heft of the world’s sixth-largest bank with the subject-area flex of Pollination Group, founded in late 2019, which provides climate impact advisory and strategic consulting services to governments, businesses, and public/private capital funds.
Through its venture capital arm, Pollination Labs, the firm also seeks to identify and support projects in seven key economic sectors—agriculture, energy, financial services, healthcare, mining, transportation and water—that can be upscaled across multiple jurisdictions and supported by concessional finance to leverage impact. Pollination primarily focuses on investments in the Asia-Pacific region.
HSBC Pollination Climate Asset Management will operate a family of funds providing exposure to multiple global natural capital themes in emerging and developed markets, active stewardship of these investments, and quantitative evaluation of their impact.
HSBC will become a cornerstone investor in the first fund, which is expected to launch in mid-2021, aiming to raise $1 billion, followed by a $2 billion carbon credit fund.
Natural capital
HSBC Pollination Climate Asset Management is being positioned as the first large-scale investment platform to introduce natural capital—defined as earthly assets like air, water, oil, geology and the broader biosphere—as a distinct alternative asset class uncorrelated to traditional assets, with the aim of attracting allocations from sovereign wealth funds, pension funds and insurers.
“In many cases these are asset classes that are already providing a baseline return from current operations, but as a natural capital investment product, they will also generate additional returns as vehicles for carbon sequestration and land restoration,” writes Martijn Wilder AM, Pollination’s Founding Partner, who for 20 years led Baker & McKenzie’s global climate law and finance practice. “As the resource is regenerated, it offers the potential for higher yields and higher value outputs.”
Pollination’s investment themes include nature-based carbon and agriculture projects (including sustainable forestry, carbon farming, regenerative agriculture and agricultural technology, water and blue carbon initiatives), sustainable infrastructure, clean-energy digital infrastructure, industrial decarbonization of high-emitting sectors, and energy transformation including renewable and hydrogen. Capital investment in sustainable infrastructure projects such as these tripled between 2010 and 2018 to $31 trillion.
Institutional demand
“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 which will be felt for generations to come,” said Nicolas Moreau, Global CEO of HSBC Global Asset Management, in a statement on Thursday. “Through solutions such as this, we’re helping clients achieve their long-term investment objectives, while meeting their increasing demand to actively contribute to a more sustainable world.”
Earlier this spring, HSBC raised nearly $500 million for REGIO, its Real Economy Green Investment Opportunity Global Emerging Market Bond fund, a diversified, long-only portfolio of emerging market green bonds primarily from corporate issuers, aimed at delivering real economy impact in low-income countries.
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