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As the proverb says, if water always finds a way, the same applies to economic ingenuity. The UK fund launched this week aims to generate revenue from pension fund supporters recovering natural resources and acquiring profitable companies. This idea is when you can navigate issues that tend to plague green finance, such as fuzzy definitions and fear of dirty data.
The so-called positive finance of nature – conservation and recovery of nature – is the topic of the Green Finance Circle. Rebalance Earth, a startup whose founders were welcomed from wealth and pension management, has secured £25 million from the £200 billion West Yorkshire Pension Fund for its nature-based programme.
The plan is to get a supermarket that reduces the risk of flooding by paying for, for example, an upstream river maintenance project, as well as other maintenance and service charges. Perhaps cat food makers have the advantage of boosting North Sea fish stocks by restoring oyster leaves. Pension funds primarily benefit from the spread between work costs and fees collected. It aims to provide investors with an annual internal rate of return of up to 12% over 15 years. For pension funds, that’s good.
There is no shortage of ways investors and businesses can support the planet, but the most well-known is somewhat sputtering. Carbon margin trading volume fell more than last quarter, according to Ecosystem Marketplace. Some of it hides a gradual shift to stricter standards that are likely to avoid the horrifying perception of mere greenwashing.
Sustainable bonds of around $10, including greens, ocean-related blues, so-called sustainability-related greens, and so-called sustainability, are scheduled to be sold this year, but market growth has stagnated over the past five years. The fiscal and finance groups and government account for about half of borrowing in any year, suggesting that bond markets are not an easy route for companies that may want to take action.
The flood and water risks that rebalance focuses on are realistic and increasingly quantifiable. The UK Train Truck Operator Network Rail in December estimated that over the past three years, 9.3 million minutes of weather-related delays from heat and flooding to wind and subsidence would cost £370 million. British scholars have previously calculated that two-fifths of small businesses will not resume after flooding.
It is logical that businesses need to be more willing to pay to deal with risks close to home. But what about investors? When terms like “natural positive” become mainstream, it is very easy to set ambiguity about definitions and actual outcomes. One solution is to invest in attractive, tangible resource care, such as restoring certain peatlands to preserve water. This could slow the growth of this extraordinary asset class, but at least it would keep it useful.
jennifer.hughes@ft.com
