Institutional investors – such as banks, pension funds and insurance companies – may hold the key to delivering more climate finance, faster. The CGP team recently took to the road to discuss how to make that happen.
Big things start small and often I’m reminded of the Chinese proverb about every journey beginning with a single step. And so it is with the epic journey towards a safe climate, and the rapidly growing role of carbon markets in completing that journey. When we launched our first fund back in 2021 our initial investors were drawn variously from our own networks (including more than a few friends and family!), from wealthy individuals and from single-family offices.
Since then we have secured investments from multi-family offices, hedge funds and investment advisory firms. The biggest missing piece of the investment puzzle – both for our funds and the carbon market overall – has been large institutional investors. These are the banks, pension funds and insurance companies who together control trillions of dollars of retirement savings for billions of people globally. What’s holding them back, we wondered?
To answer this question, earlier this month we took a literal first step by heading to Asia-Pacific, Europe and the Middle East on a three-week investor roadshow. After meeting with prospective and existing investors in Australia and Singapore, we headed to London.
Amongst 25 meetings in five days, the stand-out moments of the London leg were an intimate, warts-and-all investor Q&A co-hosted by Paul Krake and Climate Transformed, and an evening “State of the Carbon Market” panel discussion. Hosted by CGP Chief Strategy Officer Stephanie Russo, and featuring panellists Ronan Carr from BeZero Carbon and Robert Gardner from Rebalance Earth, the audience of more than 50 people quickly dived into the weeds on questions of supply, demand, quality and integrity.
Next stop was Switzerland, with more one-on-one meetings with institutional and family office investors as well as breakfast briefings co-hosted by Maria Kindness, CEO of Impactus Partners, and our Swiss partners FundRock. More than 50 people attended these sessions where we shared our views of the carbon market, generating significant interest from the investors who attended. Finally the trip wrapped up with a lightning stopover for meetings in Dubai. Over the course of three weeks, we met with more than 160 people representing dozens of organisations and we were impressed with their collective intellect, interest and commitment to climate action.
With time to reflect on the trip, a few key observations stand out. First, there is significant interest and appetite from institutional investors in carbon markets, with a surprising level of existing knowledge. Second, there is a growing and welcome focus on quality and integrity, which are hallmarks of our investment approach. Third, scale remains a barrier in the short term; large institutions need to write large cheques, and participation will need to grow over time as the market grows. And finally, specialist expertise counts; at the risk of immodesty, all of the investors we met with were impressed with the CGP team’s track record, depth of knowledge, operational capability and commitment to impact.
I’m confident we’ll see tangible outcomes from the trip throughout the rest of 2023, comforted by the knowledge that as more investment flows into carbon markets, more positive climate impact will follow.