A report from McKinsey & Co and Credit Suisse has shown a growing interest in investments that have a positive benefit for the environment.

The report called From Niche to Mainstream: The Building of an Institutional Asset Class showed the rise in number of investors seeking for investments that are sustainable commodities, protect the environment and are lower carbon emissions.

The report concludes that over the next five years, the investment opportunity for environmental investments will between $200 billion to $400 billion. These figures represent a major uptick from the current annual private investment of around $10 billion. However, the higher figures that are predicted still fall well short of the amount of investment needed every year in order to protect global ecosystems. This amount is estimated to sit somewhere around the $300 billion mark.

High yields are driving this interest, more than the green benefits and the ‘feel-good’ factor of these investments. The report reported that investors are also drawn by the fact that the yields from these natural resources – such as Forestry and Forestry Products – are uncorrelated with overall shifts in the broader marketplace, ensuring reliability in the investment. This is because such resources are, on the whole, independent from overall macroeconomic factors and therefore offer a solid way in which to diversify from other investments in asset classes such as stocks or shares

Credit Suisse’s CEO, Tidjane Thiam, wrote in the report: “For institutional investors, the risk-return profile of a product outweighs any other characteristics. Low correlation with other asset classes helps ensure a diversification effect. The conservation impact of a product is generally of little importance.

“In the current environment, investors are looking for an edge to drive excess returns – and many investors are increasingly seeing conservation impact investing as a way to achieve substantial environmental and social impact alongside market-rate financial returns.”

The report – which is a follow-up to Credit Suisse’s report, ‘Moving Beyond Donor Funding Toward an Investor-Driven Approach‘ – suggests that conservation financing is now ready to move into the mainstream. It suggests that there is a “growing pipeline of in-the-money projects that are ready for scaling.” Indeed, the market for FSC-certified forest products is tipped to skyrocket over the coming five years, quadrupling in value to more than $200 billion.

Sustainable agriculture and ecotourism are also seeing huge growth, the report found. As sustainable products achieve such premium prices, these asset classes “are just smart, economically attractive business opportunities waiting for mindful capital infusions and project developers,” the report said.

Over time, conservation investments look set to become a major segment of the investment marketplace, with institutional, high-net-worth and potentially even major retail investors keen to buy into large-scale ecosystem conservation.

As the report added: “Sustainable farmland, healthy forests, clean water and abundant habitat stand to become more valuable as the global population climbs to 9 billion by 2050. Already, pioneering investors have put together financial solutions that combine real assets, like tropical forests, with cash flows from operations in fields such as sustainable timber, agriculture and ecotourism. Conservation finance, as this field is called, represents an undeveloped, but emerging private sector investment opportunity of major proportion.”