NYSE Aims for Impact with Sustainable Asset Class

The New York Stock Exchange (NYSE) is co-developing a tradeable sustainable enterprises asset class to boost investment into “natural capital”.

Tradeable sustainable enterprises – dubbed “natural asset companies” – hold the rights to ecosystem services such as carbon sequestration, the NYSE said.

The stock exchange is developing the initiative in partnership with the Intrinsic Exchange Group.

Natural asset companies will be listed and traded on the NYSE, which it said would create “a new market whose assets generate trillions of dollars in ecosystem services annually”.

The stock exchange estimated that natural assets – which are based on the value of ‘services’ provided by nature, such as a forest acting as a store of carbon – produce around $125 trillion annually around the world. Other services provided by natural systems include water purification and biodiversity enhancement.

Data from Morningstar shows that investments focused on environmental, social and governance (ESG) factors have risen dramatically in recent years. This year alone, assets have risen by 12% to $2.3 trillion, between the end of March 2021 and late July 2021.

The Intrinsic Exchange Group (IEG) claims to have pioneered the idea of natural assets, working with natural asset owners to form and list companies to convert natural wealth into financial wealth.

According to the IEG website, “this wealth is based on healthy ecosystems and nature's production of vital ecosystem services, rather than on extractive measures”.

Stacey Cunningham, NYSE president, said: “With the introduction of natural asset companies, the NYSE plans to provide investors an innovative mechanism to financially support the sustainability initiatives they deem critical to our future.

“Our work with Intrinsic Exchange Group is another example of the NYSE tapping into our community to drive meaningful progress on ESG issues with a solutions-based approach.”

IEG’s founding investors include the Inter-American Development Bank and the Rockefeller Foundation. The NYSE has also taken a minority stake in the company.

The NYSE added that it would seek SEC approval for listing requirements tailored to natural asset companies and incorporate IEG’s accounting methodology. It aims to have the first companies listed later this year.