GFI spearheads initiative for investment in nature recovery

In a groundbreaking initiative, the Green Finance Institute (GFI) is convening members amongst some of the UK’s preeminent financial institutions to explore opportunities for the finance sector to make substantial contributions towards the country’s nature-related objectives. These goals encompass ensuring a healthier, more robust natural world for future generations, and earmarking at least 30% of habitats for conservation within this decade.

GFI has issued an urgent call to arms for private sector investment. This financial backing is “critical” to the success of the UK’s ambitious commitment to reverse the trend of nature degradation by 2030. The private sector’s active involvement will ensure a steady flow of investment towards projects focusing on nature recovery, nature-based solutions, and sustainable and regenerative agricultural practices.

Aligning Economic Transition with Nature Investment

The coming years have been underscored as “pivotal” in the GFI’s strategic roadmap. The UK’s aspiration to drive an economic transition that recognises and invests in nature’s inherent value, as detailed in the Dasgupta Review, heavily relies on these formative years. The Treasury’s response to the Dasgupta Review was to set an impressive target of £1bn per annum of private sector investment in nature by 2030. It also pledged to incorporate nature-related impacts in governmental spending decisions more effectively. The GFI-convened Group will develop a national database tracking private investments in nature-related projects to track progress towards HMT’s £1bn goal.

On establishing the Group, GFI chief executive Dr Rhian-Mari Thomas said: “The market infrastructure is being put in place to enable the flow of private sector capital into nature recovery and nature-based solutions, but there is still much to be done. The support of the UK financial sector will be critical, in addition to the support of the broader UK private sector, and the GFI is delighted by the enthusiasm and leadership of those joining this new Group.”

Embracing Emerging Nature-Based Asset Classes

Asset managers, as key stakeholders, will play a decisive role in advancing this initiative. The member firms involved, including Barclays, Natwest Group, Lloyds Banking Group and UBS,  will champion the establishment of a robust green finance taxonomy within the UK. This taxonomy, initially slated for release earlier this year and now anticipated in autumn/winter, aims to provide investors with a clear framework to identify and label investments as ‘green’ or ‘transition-related.’ While its primary focus will be sectors tied to energy, there is a strong call to action for robust guidance on investments in natural resources and nature-based climate solutions.

This imminent taxonomy represents a significant opportunity for asset managers. It opens up new avenues for investment in burgeoning nature-based asset classes, a frontier that has so far been relatively under-explored. These emerging asset classes hold immense potential for sustainable growth, presenting a compelling prospect for managers looking to diversify their portfolios with resilient, future-oriented investments.

The initiative launched by the GFI is a testament to the power of collaboration between financial institutions and their ability to leverage their resources for the greater good. It is a clear signal for asset managers to align their investment strategies with the broader goals of nature preservation and recovery, as we collectively strive towards a sustainable and prosperous future. This not only serves the intrinsic value of nature but also promises robust returns and risk mitigation in the long term, underscoring the true essence of green finance.

 

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