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Asset Management / Wealth Management
Asian family offices warm to carbon-focused investments
Climate funds see growing demand from new generation of investors
Tom King 6 Apr 2023

Family offices are increasing the share of sustainable investments in their portfolios, bolstered by the rise of a new generation of investors who care about climate change.

This is particularly true in Asia, where wealth is rapidly growing and, at the same time, the impacts of the climate crisis and the urgency of decarbonization are most felt.

The region is also home to a myriad of nature-based assets such as mangroves, which are known for their carbon sequestration capabilities – they can store three to four times more carbon than land-based forests. There are more than 7.5 million hectares of mangrove forests in Asia, or almost half of the world’s total mangrove forest resource.

This natural asset has an important role to play in Asia’s energy transition as it could offer carbon credits that will enable companies to support climate mitigation and adaptation. As such, an increasing number of funds are focusing on creating investment opportunities in this field.

One of these is Sydney-based Apostle Funds Management, whose new fund, launched only on March 27, offers exposure to global carbon markets for accredited and institutional investors.

Luke Donovan, partner, global carbon markets, at Apostle, notes that carbon markets are an essential component of global efforts towards achieving net zero. “These markets are regulated and mandated by governments worldwide, with oversight and control mechanisms in place to ensure integrity and scalability, and also serve as a hedge against climate risks and inflation,” says Donovan.

Another Australian player in this market is Melbourne-based Carbon Growth Partners (CGP), whose US$160 million fund invests in high-quality, nature-based carbon credit projects. Last year, the firm secured a US$10 million cornerstone investment from Silverstrand Capital, a family office based in Singapore.

The more the merrier

While carbon-focused funds are often seen as a nascent segment of the sustainable investment market, their foundations were laid decades ago. “It's been going on for 25 years and has been built on millions of hours of research and work from scientists, policymakers and finance professionals, but it is still relatively nascent from an investment management point of view,” CGP chief executive Richard Gilmore tells The Asset in an interview.

With the rising trend of climate-focused investments, there has been a flurry of new entrants to the carbon fund management market. However, Gilmore does not see the market being diluted.

“For us, we think a rising tide raises all boats. The more liquidity there is in the market, the more investment management, the more professionalization of that investment management that happens in the market is good for everybody, including us, even if that creates competition for capital,” he says.

CGP invests in a slew of projects, including the Delta Blue Carbon Project, which covers 350,000 hectares of tidal wetlands on the southeast coast of Sindh in Pakistan. With a lifespan of 60 years, this project is expected to sequester 142 million tonnes of carbon dioxide and produce over 128 million high-quality credits.

The fund also invests in CQuest Capital, a social impact project developer that aims to transform the lives of families in vulnerable communities around the world by providing access to sustainable energy services and clean energy technologies that reduce greenhouse gas emissions.

Gilmore says CGP is a regular customer of Climate Impact X, Singapore’s global marketplace and exchange for high-quality carbon credits.

“We spend a lot of our focus sourcing the highest integrity, highest quality of credits and we have, in addition to the alignment with the core carbon principles, a nine-step criteria that we think about in terms of what makes a high-quality, high-integrity project. And that's one of the reasons that it is important for investors in this market to select a specialist manager,” he explains.

Singapore opportunity

To date, about 25% of CGP’s capital has come from large single- and multi-family offices. “Generational wealth transfer is delivering more demand for what you might clumsily call ESG-aligned investments or nature-positive investments,” Gilmore says. “And so we see that as an opportunity for our funds, and for raising capital for climate projects generally.”

The fund recently did a roadshow in Singapore, and now has three people based in Hong Kong who are regularly meeting with family offices and exploring investment prospects in the city-state.

Gilmore is happy to see Singapore becoming a hub for green finance and the establishment of Climate Impact X. He believes other climate finance-related businesses will want to be domiciled in Singapore, which could be complementary to its growing private wealth management business.

“Singapore is a wealthy country, but it's almost 100% reliant on imports of energy, food and water, all of which are highly climate-exposed, and it's a low-lying island state,” Gilmore says. “So, on the one hand, you've got the investment opportunity, the ability to attract capital for climate solutions, and yet Singapore faces those climate problems, perhaps as acutely as any country globally.”

Looking at the opportunities across the region, he notes: “Significant wealth in Asia is looking for both returns and impact, and there is a huge climate-change need and opportunity. If you think about the most important places that we need to protect and restore from a biodiversity, climate point of view, many of those are here in Asia.”

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