International market to invest in nature does not exist at scale, MPs are told
An international market to invest in nature does not exist at scale and “needs to grow very significantly”, MPs have heard
It was revealed to MPs during an Environmental Audit Committee (EAO) meeting, where experts on green investment pointed out the current problems with creating a global market where investors can put their money into projects that help nature and ecosystems to balance some of the damage caused by economic growth.
Gordon Bennett, who is in charge of utility markets at the Intercontinental Exchange (ICE), which is the biggest energy and environment marketplace in the world, shared: "I think the scale for nature in the market internationally is small. I wouldn't describe it as a market when a market means lots of things to different people but if I'm thinking about it in terms of a financial market, it really doesn't exist at any scale today."
UK policymakers, regulators, investors and businesses have started paying more attention to the risks related to nature and the need for the private sector to do something about the worldwide loss of nature.
However, Andy Howard, who leads Sustainable Investment at Schroders, told the committee that according to their calculations, the value of natural capital assets if it were a separate asset class of its own would makeup about 0. 2% of the value of assets handled by the asset management industry globally.
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He said: "The point that we're making is that this is a market which will need to grow very significantly. We've got expertise, we've got a supportive policy environment, we've got a well respected internationally policy framework as well and policy voice to lend. But it is an industry that the growth lies ahead of us more than it lies behind us and I think there's definitely building blocks that need to be built on."
Helen Avery, who directs nature programmes at the Green Finance Institute, thinks the UK is in a "good position" but says it's still "early days We've got quite a long arc until we get to the point where it's all green finance and pension funds to invest," she pointed out.
She also said that for the market to grow, financial institutions must be clearer about how they depend on and affect nature. This comes after the Taskforce on Nature-related Financial Disclosures (TNFD) set up new rules last year for companies to tell people how they impact nature.
In November, the EOC suggested that the Government should make it a rule for companies to say how they affect nature using the TNFD's way within the next three to five years. Ms Avery said that the UK can lead the journey to build the market by encouraging firms to disclose on nature-related impacts and dependencies through the TNFD.
She mentioned other actions like making a green list to show which investments are good for the planet and the World Wide Fund for Nature's work on helping nature. Mr Bennett said that the UK has been great at looking after financial markets because of strong support from policies in the past.
He explained: "If you're thinking about Net Zero from a markets point of view, from an economics point of view, you need to know two things the price of energy and the price of carbon. And at ICE, all of our energy and carbon markets are risk managed within the UK so we're definitely at the centre of financial markets."
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