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IN THIS PAPER
Natural capital: from concept to investment. A closer look at key asset types including forestry assets, farmland and ‘natural climate solutions’ such as forest carbon. Includes comparison of return drivers, yield expectations, inflation sensitivity and carbon credit generation potential. An extensive ‘jargon buster’ demystifies sector terminology.
The natural capital asset manager landscape. More than fifty asset management firms are now active in this sector, often running multiple strategies. The landscape of timberland funds is mature, while agriculture funds rose to prominence in the 2010s. Today, Nature-based Solutions (NBS) are witnessing particularly rapid growth.
Carbon credit considerations. There has been a rapid recent proliferation of strategies in this sector with an explicit objective to generate carbon credits: a relatively new subject to many asset owners. A dedicated section of this report provides information on carbon credit usage, generation, quality, returns and more.
WHY DOWNLOAD?
In a remarkable swing of ‘real asset’ appetite, natural capital manager searches on behalf of bfinance clients have outnumbered real estate manager searches for the first time in 2023: enthusiasm for this space has provided a stark contrast to the caution surrounding property investment (see Manager Intelligence and Market Trends, November 2023).
While natural capital investing is not new, its nature has evolved. Investors in agriculture, timber, mining, energy and ocean marine-based activities have historically focused on income and capital appreciation derived from natural resource management and/or extraction. Today’s strategies place more emphasis on sustainability and may feature other return drivers including carbon credits and conservation easements.
Those allocating to natural capital must keep pace with a rapidly growing and changing landscape of managers and strategies, as well as the accompanying jargon. Investors are seeking to understand risk/return profiles, sustainability credentials and varying approaches to carbon credits. This report seeks to support market participants with an overview focused primarily on forestry, agriculture and ‘nature-based solutions’ (NBS) strategies. It closes with a discussion on carbon credits, given the ongoing questions surrounding quality, return expectations and the integrity of the market.
Important Notices
This commentary is for institutional investors classified as Professional Clients as per FCA handbook rules COBS 3.5R. It does not constitute investment research, a financial promotion or a recommendation of any instrument, strategy or provider. The accuracy of information obtained from third parties has not been independently verified. Opinions not guarantees: the findings and opinions expressed herein are the intellectual property of bfinance and are subject to change; they are not intended to convey any guarantees as to the future performance of the investment products, asset classes, or capital markets discussed. The value of investments can go down as well as up.
