Aviva Launches Carbon Removal Fund

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 that 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.

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The launch of the Article 9 fund, backed by Aviva’s investment, wealth, and retirement business, comes as governments and investors grapple with the need for a substantial acceleration of investment in carbon dioxide removal. According to research from the Intergovernmental Panel on Climate Change (IPCC), “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 to 1,000 billion tonnes this century.

Aviva also noted that the fund’s launch comes at a time when investors are preparing for the impact of carbon pricing – the mechanism by which governments capture the external costs of greenhouse gas emissions – 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 likely need to consider 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.

Additionally, a report co-led by researchers at the University of Oxford, State of Carbon Dioxide Removal, emphasized the diverse range of carbon dioxide removal methods needed to address climate change, including reforestation, ocean fertilisation, and biomass sinking.

Stakeholder access

Aviva has announced 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 commitment to biodiversity and nature-related risks, Aviva acquired an afforested area of land on the Isle of Mull in 2023, with approvals for 800 hectares of mostly native broadleaf woodland. Over the lifetime of this project, Aviva aims to sequester an estimated 226,000 tonnes of carbon.

“That [stakeholder accessstakeholder] 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.