SINGAPORE – Many institutional investors here are putting money into what is termed the “nature space” due to demands from nature activists, clients and regulators, noted a new report.
It found that 68 per cent of investors in Singapore said nature is now considered a part of their investment strategy. They were also most likely to expect increased returns and reduced nature risk in their investments than other investors.
Nature space refers to the surrounding ecosystem, such as river water, the wood from forests, and the birds and bees that help to pollinate crops.
Companies and individuals are increasingly recognising that an over-reliance on such natural resources – such as trees for building or clean water for producing food and drinks – has led to consequences that include climate change.
This could be seen in the way forest fires, floods and drought increase risks to supply chains.
These risks are partly behind the increased investment in solutions or projects that help to mitigate such calamities or have a positive effect on nature and biodiversity.
The possibility of making a dollar is also behind the trend, with the report noting that 71 per cent of local investors working in the space cited returns as a primary motivator, compared with 60 per cent globally.
Global climate and nature advisory and investment firm Pollination, which undertook the study to understand how nature is viewed as investment risk and opportunity, surveyed 557 institutional investors across the United States, Britain, Australia, Singapore, Japan and France.
They had assets under management ranging from US$10 billion (S$13.6 billion) to US$500 billion.
The regulatory pressure faced by local companies and investors to enter the nature space is likely driven by Singapore’s Green Plan 2030 and the Government’s goal of reaching net-zero greenhouse gas emissions by 2050.
A global framework to help firms measure and report nature-related risks and impacts released earlier this week by the Taskforce for Nature-Related Financial Disclosures (TNFD) could further add to the pressure.
The Pollination report released on Wednesday also found that 50 per cent or so of Singapore investors focused the most on technological solutions for nature problems and risks, followed by Australia at 45 per cent and the US, 40 per cent.
Ms Zoe Whitton, its co-author and Pollination’s managing director and head of impact, said the local focus on tech is likely due in part to “the development of the local market, its conditions and the availability of the investments”.
“There could be a higher ask or expectation by companies here to respond to nature risks, and oftentimes a company’s response is what can drive the business case for tech solutions.”
The Straits Times previously reported that a new crop of local companies have opened or are expanding here to offer advice and asset management on climate investments, as well as data analytics and software solutions from fintech companies.
Property and infrastructure were seen by 51 per cent of Singapore investors as a risky sector, the highest figure for any asset class across the regions surveyed.
The risk stems from the nature footprint of buildings, including the land size and raw materials needed for the built-in environment and maintenance. A nature footprint refers to the impact – positive or negative – a person, organisation, product or service can have on biodiversity.
Ms Whitton noted that investors in Singapore “highlight more material and financial risk in nature compared to the other investors surveyed”, which could simply be representative of the broader experience for investors here.
“It’s an interesting indication of the different portfolio experience investors in Singapore face and the different portfolio mix, both in the domicile market and across South-east Asia,” she added.
Ms Rapheal Erasmus, Citi’s Asia-Pacific head of sustainability and corporate transitions, said the TNFD would be a useful framework for companies to use in reporting and managing their nature-related risks and opportunities.
She also advises companies to consider factors beyond carbon emission and climate change and to assess biodiversity risks as “biodiversity loss has a real impact on the global economy and is deeply intertwined with climate change”.
“Investors are increasingly concerned about biodiversity-related risks and companies now have to think about the effect of biodiversity loss on their operations and how their activities may exacerbate the problem – in the same way that they have been thinking about climate change.”
