| It all starts with a drop in the ocean At least USD5 trillion of private finance went to activities with negative impacts on nature in 2022, 140 times greater than current amounts going to nature-based solutions (NbS), according to the World Economic Forum (WEF).
WEF says: "Given NbS have the potential to supply around one-third of mitigation needs and could save USD104 billion in adaptation costs by 2030, the status quo makes little ecological or economic sense."
The pressure is on investors to reverse this trend and start supporting projects that protect the 55 per cent of global GDP – the equivalent of USD58 trillion per annum – that is estimated to be moderately or highly dependent on nature.
Enter the GBP20 billion West Yorkshire Pension Fund (WFPF) which, as we report this week, is the first investor to put capital to work in Rebalance Earth, a UK-based boutique asset manager financing nature's ecosystem
services as business-critical infrastructure.
WYPF – part of the GBP60 billion Northern LGPS pool – believes Rebalance Earth allows the fund to "address critical issues like climate change adaptation and resilience" in the UK.
The fund manager will support projects that aim to tackle flooding; drought; water quality; biodiversity and ecosystem health; and carbon emissions.
The local authority represents an important endorsement for what is a new and untested fund, but one that offers genuine potential to meet UK pension funds’ ESG strategies while aligning with their long-term income requirements.
While this initial investment may– forgive the pun – be a drop in the ocean, it will likely lead to other LGPS funds following suit and ultimately make headway in closing the GBP50 to GBP100 billion gap required for nature restoration in the UK.
In other news, research released by Carne Group, reveals more than four out of
five institutional investors and wealth managers expect to have 5 per cent or more of investment assets in ETFs within three years, and almost all say ETFs are increasingly used as core holdings rather than for short-term allocation.
The findings come as a growing number of asset managers launch active ETF offerings, including Robeco, iShares, Eurizon Capital, ARK Invest many of whom hope to take advantage of a potentially favourable regulatory environment.
Patrick O’Brien, Managing Director, Business Development at Carne Group, tells us: "Institutional investors are looking to increase allocations to ETFs over the next three years, with ETFs firmly established as a core holding rather than a short-term allocation tool. More active ETFs will lead to more choice. This will further increase investors’ holdings in ETFs as part of their core investments, and that trend will be supported by more managers entering the space and opening up new
distribution channels."
And finally, our weekly reminder that voting process is now open for the Institutional Asset Manager service provider awards for 2024. Follow this link to place your votes for your favourite firms.
You can vote until 25th October, 2024 and the awards event will be held on 4th December in central London.
Gill Wadsworth, Editor, Institutional Asset Manager
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