NYSE and Intrinsic Exchange Partner for New Asset Class
The New York Stock Exchange, part of Intercontinental Exchange, a leading global provider of data, technology and market infrastructure, and Intrinsic Exchange Group (IEG) announced that they are jointly developing a new class of publicly traded assets called Natural Asset Companies, or NACs. NACs are sustainable enterprises that hold the rights to ecosystem services produced by natural, working or hybrid lands.
“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.” – NYSE President, @Stacey_Cunning
— NYSE 🏛 (@NYSE) September 14, 2021
On a global basis, natural assets produce an estimated $125 trillion annually in ecosystem services, such as carbon sequestration, biodiversity and clean water. The formidable output underscores the financial potential of an asset class that is wholly based on environmental investment.
“This new asset class on the NYSE will create a virtuous cycle of investment in nature that will help finance sustainable development for communities, companies and countries,” said Douglas Eger, CEO of IEG. “Together, IEG and the NYSE will enable investors to access nature’s store of wealth and transform our industrial economy into one that is more equitable.”
Because the value created by NACs is not fully captured by traditional economic metrics, IEG has developed an accounting framework to measure ecological performance to complement GAAP financial statements. Developed in consultation with former FASB Chairman Robert Herz and leading accounting firms, IEG’s framework enables investors to value the ecosystem services generated by NACs.
In addition, the NYSE will develop and seek SEC approval for unique listing requirements tailored to NACs and incorporating IEG’s accounting methodology. IEG and the NYSE would then begin working with the first NACs to help prepare them for listing and trading as publicly held entities on the NYSE.
“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,” said Stacey Cunningham, President of NYSE Group.
IEG is currently advising a number of sovereign nations, private landowners and public companies on the potential creation of NACs. IEG and the Inter-American Development Bank (IDB) are working with the Government of Costa Rica to lay the foundation for NACs that would preserve and grow natural assets throughout the country. In the private sector, IEG anticipates announcing its first partnership later this fall in collaboration with a multinational corporation.
IEG has received initial funding from IDB Lab and IDB, The Rockefeller Foundation, Aberdare Ventures and Entertaining Ideas. IDB was an early supporter of IEG’s vision and helped it identify and develop projects in countries throughout South America. IDB’s extensive network of relationships and long engagement in both regional and global sustainability efforts position it as an important key partner to IEG.
The NYSE has taken a minority stake in IEG and plans to license its accounting framework to support the development of the new asset class. The transaction will not be material to ICE’s earnings or have an impact on capital allocation plans.
Statements from Key Stakeholders:
Robert Herz, former Chairman of FASB:
“In addition to GAAP financial statements, we believe it is absolutely critical to provide investors in Natural Asset Companies with relevant, reliable and understandable information on the flows of the ecosystem services they produce and their stocks of natural capital assets.”
Mauricio Claver-Carone, President of Inter-American Development Bank
“This announcement by NYSE and IEG comes at a critical time when the economies of many countries in Latin America and the Caribbean have struggled as a result of the pandemic. The IDB Group is proud to have been the first supporter of IEG as an investor and a long-standing partner working with countries to develop projects for the exchange. Unlocking the tremendous intrinsic value of nature will allow countries to leverage their natural capital for conservation and human development goals.”
Dr. Rajiv J. Shah, President of The Rockefeller Foundation
“Climate change is an existential threat, one that demands all of us to urgently consider every opportunity to mobilize resources to protect vulnerable ecosystems and communities and fight for the future of billions of people around the world. This is why we are proud to have been an early supporter of IEG’s approach to identifying new and sustainable ways for countries to safeguard their lands and waterways while creating a market to preserve natural assets.”
Andrea Meza Murillo, Minister of Environment and Energy, Costa Rica
“In Costa Rica, IEG is supporting us to build a pilot project for establishing a Natural Asset Company. This will deepen the economic analysis of giving nature its economic value, as well as to continue mobilizing financial flows to conservation. All of this, in a key moment when we have to meet social and economic needs on our people and comply with what science tells us about the 30×30 goal, on protecting at least 30 percent of land and oceans by 2030.”
Market feedback is being sought during 45-day consultation period
Upstart exchange has seen market share increase to near 4%.
The World Federation of Exchanges published its first-half highlights.
Buy-side firms can discover liquidity more efficiently and execute on Turquoise.
With Eugene Kanevsky, James Redbourn, and Joanna Wong, CLSA