The fund aims to provide investors with access to a range of carbon removal projects, at a time when governments are waking up to the scale of work required to meet the goals of the Paris Agreement.
Aviva Investors has launched a carbon removal fund which will focus on both nature-based and engineered carbon removal solutions.
The Aviva Investors Carbon Removal fund (CRF) aims to give institutional investors access to opportunities in afforestation and restoration projects across areas of peatland and mangroves, as well as commercial forestry.
The launch of the Article 9 fund, which has been backed by Aviva’s investment, wealth and retirement business, comes at a time when governments and investors are grappling with the need for a huge acceleration of investment in carbon dioxide removal.
According to research from the Intergovernmental Panel on Climate Change (IPCC), the main global climate science body, “all pathways that limit global warming to 1.5C with limited or no overshoot” project the use of carbon dioxide removal of around 100 billion and 1,000 billion tonnes this century.
Aviva also said that the fund has come at a time when investors are preparing for the impact that carbon pricing – the mechanism by which governments capture the external costs of greenhouse gas (GHG) emissions – will have on their portfolios.
“We think our fund is truly at the forefront of how asset managers can best capture these opportunities. This is a fund designed for investors with ambitious decarbonisation pathways in place and that are looking for ways to hedge against exposure to carbon pricing,” said Daniel McHugh, chief investment officer at Aviva Investors.
Natural and technological solutions
Though never a substitute for decarbonisation, many investors will most likely need to look at carbon removal solutions to achieve net-zero emissions targets. As such, Aviva laid out the argument for nature-based investments in its paper, ‘Navigating nature: Opportunities for the investor of tomorrow’.
“Nature remains by far the most cost-effective and scalable carbon removal solution at present and therefore there is an opportunity for investors to integrate nature early within transition plans, get ahead of regulation and differentiate themselves within the market,” the paper stated.
In addition to this, a report – State of Carbon Dioxide Removal – co-led by researchers at the University of Oxford, highlighted the diverse range of carbon dioxide removal methods which must be rapidly scaled up to address climate change. These methods can include reforestation, ocean fertilisation and biomass sinking, among others.
Stakeholder access
Aviva has said it will work directly with conservation groups, NGOs and specialist land managers, which it stressed is vital to the strategy’s success.
As part of its focus on investing in biodiversity and nature related risks, Aviva acquired an afforested area of land on the Isle of Mull in 2023 with new planting approvals for 800 hectares of mostly native broadleaf woodland. Over the lifetime of this project, Aviva said it aims to sequester an estimated 226,000 tonnes of carbon.
“That [stakeholder access] is a vitally important element of this strategy as it should provide clearer, more direct and less diluted reporting lines from the projects we fund on how investment capital is being deployed, which activities that funding is supporting and where, and the impact it is having in terms of real-world outcomes,” said Greta Talbot-Jones, director of natural capital at Aviva Investors and co-portfolio manager of the CRF.
