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Lombard Odier Launches $400 Million Natural Capital Equity Fund

An onshore wind turbine on the Shepham Wind Farm near Pevensey, U.K., on Thursday, Nov. 12, 2020. Brexit talks are going down to the wire, and the European Union's chief negotiator Michel Barnier is threatening British access to the continent's single energy market as a way of extracting concessions on fishing rights. Photographer: Chris Ratcliffe/Bloomberg

(Bloomberg) —

Lombard Odier Group, the Swiss wealth and asset manager, has launched a fund to invest in companies that seek to harness the power of nature and contribute to its restoration.

The firm’s Natural Capital fund will open with about $400 million of assets under management and will invest in a portfolio of as many as 50 small- to medium-sized publicly traded companies in North America, Europe and Asia, according to a spokesperson for the firm. Lombard Odier said in a statement on Monday that the fund was “directly inspired” by the Prince of Wales and was developed in partnership with the Circular Bioeconomy Alliance established as part of the Prince’s plan to accelerate the shift to eco-friendly markets.

The natural world is in crisis — a record number of animal and plant species are now threatened with extinction and three-quarters of the land on earth has been “severely altered” by human actions such as deforestation and urban sprawl. So now, just as growing numbers of fund managers and bankers consider the impact of climate change on their business and their own contribution to global warming, a small but expanding group of investors are beginning to consider the financial implications of biodiversity decline and nature loss.

“Nature is fundamentally the most productive asset we have and yet we are depleting it with an economic model that is linear, where we take and then waste,” said Chris Kaminker, head of sustainable investment research and strategy at Lombard Odier in London. “This is a huge risk for global economic activity. The good news is we are now seeing this model evolve before our eyes to one that is more circular and harnesses and preserves nature.”

Humans rely on the natural world for crops for food, materials for building and medicine, as well as protection from extreme weather. More than half of the world’s total gross domestic product, or $44 trillion, involves activities that are moderately or highly dependent on nature, according to the World Economic Forum. Preserving nature will require greater “circularity” in the production and consumption of goods, as well as eliminating waste from industrial activities, said Lombard Odier.

See also: Why Fund Managers Started Worrying About Biodiversity: QuickTake

Lombard Odier has identified a possible investment universe of about 500 companies for the new fund, with market capitalizations of between $1 and 20 billion. The fund will focus on companies in what Kaminker calls circular bioeconomy, such as Borregaard ASA, which uses natural raw materials to produce environmentally-friendly biochemicals, and other companies that are focused on zero waste or resource-efficiency.

“We think that it’s become a very fertile ground to identify some really interesting companies with superior business models, with greater profitability and better growth avenues,” said Hubert Keller, managing partner of Lombard Odier.

Keller said Lombard Odier has been in dialog with Prince Charles and his team about nature-based investing after the Prince launched a sustainable market initiative as a “Marshall-like Plan for Nature, People and Planet.”

“We need to accelerate our efforts and set the course for a sustainable future rooted in a new economic model,” Prince Charles said in a statement. “Building a sustainable future is, in fact, the growth story of our time.”

Lombard Odier said its fund is the first of its kind to invest in public companies. Axa Investment Managers launched a 200 million-euro ($236 million) impact fund last year to invest in projects that protect natural habitats, while HSBC Global Asset Management Ltd. said in September that it’s teaming up with a specialist climate change advisory firm to create a new fund manager to “mainstream natural capital as an asset class.”

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