557 institutional investors from various segments of the global fund management sector were surveyed as part of Pollination’s Nature Finance Focus in six important countries: the UK, US, Australia, France, Singapore, and Japan.
With 332 responders working for companies that handle assets worth more than $100bn, the investors in question are sizable.
The report reinforces investor enthusiasm in nature-related investments in the wake of the Taskforce on Nature-related Financial Disclosures (TNFD) launching its framework and rising curiosity in nature’s investment possibilities.
US setting the pace
Nature-related investments are gaining traction.
The split nature of the responses across the board, from motivations and risk perceptions to expectations of returns, emphasises the experimental nature of work in the area.
Nevertheless, investors in all areas agree that some or all investments associated with nature can be categorised as an asset class (75%), with larger investors being more likely to hold this belief.
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Despite political division surrounding sustainable and responsible investment in this market, US investors are presently among the most active on the subject.
Of the engaged investors, 87% intend to increase their investments in the field, accompanied by Singapore (79%) and Australia (76%).
Many investors want both returns and impact when investing in nature, but 23% – the second most common response – indicated they were driven mainly by improving environmental outcomes.
Martijn Wilder, co-founder and CEO, Pollination commented: “Investing in the natural world is investing in the resilience of the economy. 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.”
Global disparities in risk perceptions and activist pressure
Private Equity and Alternatives are considered to be the most exposed asset class overall, though this varies when looking at certain locations.
While private equity (PE) is still the most leveraged asset class in the UK (46%), it has been surpassed by infrastructure and property in Singapore (51%), agriculture and forestry in the US and Australia (49% and 47%).
Across the globe, activist pressure has a diverse influence.
It is cited as a motivator by only 16% of English investors, compared to 50% of Singaporean investors.
Wilder added: “The TNFD’s final framework marks another step in the journey towards a nature positive future, one which will be material for companies and investors. It further clarifies the path for investors to integrate nature-related risks and opportunities into their strategies. We need to recognise this as a watershed moment; for both systems-level change, and for the nations and institutions working to transform our relationship with nature.”