Over half of UK institutional investors are either investing in natural capital or plan to do so within the next 18 months, favouring the development of their own carbon or biodiversity credits over buying offsets in the secondary market. This trend emerges from research conducted by Mallowstreet, commissioned by Gresham House.
Young trees in Galloway Forest Park, UK. AI generated picture.
The study, which surveyed 22 UK institutional asset owners managing $450 (£360) billion, highlights a growing appetite for natural capital investments. These investments are seen as potential sources of resilient and impactful returns. Asset allocations to natural capital are expected to comprise 3–5% of total assets, with 59% of respondents willing to invest up to 3%, and an additional third up to 5%.
Read more: Bullish growth projections in the carbon market
Ally Georgieva, head of insight at Mallowstreet, noted the evolving nature of natural capital as an investment theme and the increasing interest from UK asset owners. She emphasised the need for collaboration among asset managers, owners, and regulators to establish robust frameworks and approaches to foster long-term investment and environmental benefits.
Climate mitigation and adaptation are the primary motivations for these investments, with 73% of asset owners citing these reasons. Additionally, 68% aim to be good stewards of their members' and policyholders' assets. However, fewer investors focus on specific impacts like enhancing biodiversity or sustainable resource production.
Rebecca Craddock-Taylor of Gresham House stressed the importance of tailored natural capital products to meet diverse investor needs and address global biodiversity and nature challenges.
Read more: EU Commission urged to expand biodiversity credit market
The report also reveals that 52% of investors prefer generating voluntary carbon or biodiversity credits to offset emissions and nature loss, rather than purchasing them on the open market. However, there is a call for more rigour and standardisation in the voluntary credit markets to enhance investor confidence.
The Science-Based Targets Initiative's recent decision to allow environmental attribute certificates, including carbon credits, for offsetting Scope 3 emissions may lead investors to reassess their approach to carbon and biodiversity credits. While this move might substantially boost carbon credit markets, experts warn it could complicate the nascent biodiversity credit markets.
Amidst significant changes in the carbon market and the revolutionary use of nature credits, now is the prime time to capitalise on these opportunities. Whether you're an investor interested in green bonds funding nature-based carbon projects, an organisation aiming to measure and compensate for your carbon footprint with nature credits, or an individual keen to contribute to nature by planting trees, we have the perfect solution. With DGB Group’s diverse and custom green solutions, including carbon and biodiversity credits, you can take action today to make a positive environmental impact and benefit from the dynamic growth of the carbon market.
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