NYSE’s New Investment Vehicle “Natural Asset Companies” To Harness ESG Fever


America’s most iconic stock exchange wants to bridge the gap between nature and the concrete jungle that is Wall Street.

As investors closely scrutinize companies’ environmental, social and governance or ESG credentials, the New York Stock Exchange on Tuesday unveiled a two-year partnership in the works with Intrinsic Exchange Group to open up investment opportunities in what IEG calls “the economy of nature”. “

“There have historically been no mechanisms to encourage the capital formation necessary to preserve and restore the natural assets that ultimately underpin the capacity for life on Earth,” said Michael Blaugrund, COO of NYSE. Fortune.

So the Big Board helps create one.

The NYSE has developed a new type of quotation vehicle that will be called a Natural Assets Company, or NAC. Using NACs, governments, farmers and other owners of natural assets will be able to form a specialized company that owns the rights to ecosystem services produced on a given piece of land, services such as carbon sequestration or clean water. . Then the company will operate the US public markets through the NYSE like any other entity would. The difference is that instead of using the raised capital to consolidate a balance sheet, fund mergers and acquisitions, or buy back shares later, NACs will use the funds to help preserve a rainforest or undertake other conservation efforts. , like changing the conventional methods of a farm. agricultural production practices with regenerative methods.

In return, investors will have access to a new form of sustainable investing – a space that has captivated BlackRock CEO Larry Fink over the past few years, although there are big unanswered questions about it. A 2020 report from the US SIF Foundation, a nonprofit organization that advocates for the adoption of sustainable investing, found that one in three dollars under professional management in the United States at the end of 2019 was managed with a sustainable investment strategy.

“Our hope is that owning a natural asset company will allow a growing range of investors to invest in something that has intrinsic value, but which, until now, was really excluded from the financial markets. Blaugrund said.

When public, an NAC will be required to file financial statements in accordance with US accounting rules, like any other publicly traded company. However, IEG, whose investors include the Inter-American Development Bank, the Rockefeller Foundation, and Aberdare Ventures, has also developed a framework to measure the ecological performance of a NAC to fill in the gaps in traditional measurements. Ecological standards will include “relevant, reliable and understandable information on the flows of ecosystem services [the NACs] produce and their stocks of natural capital assets, ”former Financial Accounting Standards Board chairman Robert Herz said in a statement on Tuesday. Herz and several accounting firms have helped advise IEG on the development of the ecological framework.

The NYSE also took a minority stake in IEG, according to Tuesday’s statement. The companies did not disclose the terms of the investment, however. The NYSE said the investment was not material to the earnings or capital allocation plans of its parent company, Intercontinental Exchange.

The exchange plans to file listing standards and accounting information for NACs with the United States Securities and Exchange Commission in the fourth quarter, paving the way for vehicle availability, if approved by the SEC. , starting next year.

IEG has already succeeded in attracting the interest of issuers from several parts of the natural asset market. He plans to announce a collaboration with a “multinational corporation” to form a NAC later this year, the statement said. And IEG, in partnership with the Inter-American Development Bank, is currently in talks with the Costa Rican government on forming a NAC. “This will deepen the economic analysis aimed at giving nature its economic value, as well as continuing to mobilize financial flows for conservation,” said Costa Rica’s Minister of Environment and Energy, Andrea Meza. Murillo, in a statement.

This story was originally featured on Fortune.com


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