The Nature Conservancy building 'strong candidate' pipeline for Asia impact deals
The Nature Conservancy (TNC) is assessing impact investing deals in Asia Pacific as the environment-focused asset owner seeks to develop its footprint in the region.
“We have a few strong candidates [deals] in the pipeline and we are working on them,” Vikalp Sabhlok, director of impact investments, Asia Pacific Region Program, NatureVest, told AsianInvestor.
NatureVest is TNC’s impact investing and sustainable finance team.
Its project partners include foundations, family offices, pension funds, insurers, development finance institutions among others. It also partners with investment managers depending on the initiative it is involved in.
TNC focuses on the dual threats of accelerated climate change and biodiversity loss.
DEAL MAKING MANDATE
One of the more notable deals by TNC in the region was the launch of the Murray-Darling Water Fund in Australia in 2015.
TNC
“My mandate in Asia is to increase these kinds of deals,” said Sabhlok, adding that TNC’s role is to leverage its conservation expertise and scientific knowledge to structure deals that create meaningful impact.
The fund is the first investment vehicle in Australia to provide investors with the opportunity to achieve multiple objectives of securing water for agriculture, realising a financial return and restoring threatened wetlands.
The AUD66.8 million ($44.7 million) fund is managed by investment manager Kilter Rural.
Globally, TNC has closed about 15 such transactions.
“Our [NatureVest] team is highly interdisciplinary, covering everything from origination and deal structuring, capital raising, and post-close impact management,” said Sabhlok.
TNC has only recently started to build its team in this part of the world. “I am the first person from NatureVest to be based in Singapore and indeed, the region,” he said.
In Asia Pacific, TNC’s focus is on nature-based solutions “because Asia Pacific in general offers a lot of scope for such opportunities,” said Sabhlok.
“There is the potential to have an outsized impact,” he added.
Southeast Asia, in particular, contains 20% of all plant and animal species, as well as four of the world's biodiversity hotspots, according to the World Resources Institute Indonesia.
The region boasts the highest blue carbon content globally, with several countries being home to significant areas of mangrove swamps and seagrass meadows.
The tropical forests, which cover 500 million hectares, have significant potential for absorbing excess carbon dioxide. It also houses 25 million hectares of peatland and other diverse and valuable ecosystems.
Image credit: Shutterstock
ASIAN IMPACT
There is growing interest in impact investing, especially among family offices in Hong Kong and Singapore, as awareness about combining financial gains with meaningful impact grows.
This is more obvious with family offices since they typically have their own philanthropic or grant-giving arms and offering catalytic capital to fund innovative ideas that have potential to scale up comes more naturally to them relative to other institutional investors.
TNC hopes to encourage more private market participation in impact investing initiatives through its deal-making.
“Our mandate is specifically around mobilising private capital, because there is a realisation that public capital and philanthropic capital are not enough to reach the ambitious goals that TNC and the world has set on climate and nature,” said Sabhlok.
Nevertheless, Asia has its own nuances and challenges for impact investing, especially with the investment landscape dominated by foreign managers.
“By some estimates, the number of impact fund managers in Asia is less than 15%. That means many of the managers launching impact strategies for Asia are based in the US or Europe,” said Sabhlok.
“It’s an interesting dynamic that we have to contend with.”
PARTNERSHIPS
Sabhlok said that TNC has certain criteria that it looks for partners for initiative projects.
“We look for partners that already have an internal impact investment thesis that we can deploy in the market and find participants or market partners around that.
“Finding the right partners is important and requires a real alignment in the mission [of impact investing],” he said.
A TNC-partnered fund can be typically operational for a long period – up to 10 years.
“The partnership needs to be strong and collaborative to allow us to work effectively together daily,” Sabhlok said.
“In addition, the partner needs to have extensive, credible experience and expertise in the particular sub-sector in which we plan to collaborate. That helps, because then we can build on each other’s strength.”