By Dean Seal

The Securities and Exchange Commission is expected to decide next year on a proposed rule change that would permit for the listing of a new investment vehicle tied to the value of natural assets.

So-called natural asset companies would hold the rights to the ecological performance of natural or working areas, including natural reserves or large-scale farmlands, according to the Sept. 29 proposal published in the Federal Register. They would also have the authority to manage the areas for conservation, restoration or sustainable management, and its rights could be licensed, likely from sovereign nations or private landowners.

The entities would be tasked with generating revenue in a way that wouldn't adversely affect the natural assets in a material way, and therefore would be prohibited from conducting unsustainable activities such as mining, the proposal said..

Capital raised through a natural asset company's initial public offering or follow-on offerings would be used for conservation, restoration or sustainable management, as well as funding operations and otherwise maximizing the area's ecological performance.

The concept was pioneered by Intrinsic Exchange Group, a private company founded in 2017 that advises public sector and private landowners. The company has agreed to exclusively license its reporting framework for natural asset companies to the New York Stock Exchange in connection with the potential listing.

According to the exchange's proposal, the rule change could help end the "overconsumption of and underinvestment in nature."

The proposal has received push back from Republicans, including Idaho Senators Jim Risch and Mike Crapo, and Sen. Pete Ricketts of Nebraska. They said in a November letter to the agency that involving corporations in controlling and stewarding federal lands could "lead to a preservationist-only approach to federal land management instead of an 'all-of-the-above' working lands approach as intended by the creation of our federal land programs."

A group of 32 Republican members of the House of Representatives sent their own letter to the SEC in mid-December, asking the agency to reopen the comment period and extend its Jan. 2 decision deadline on the proposal.

The lawmakers warned that the rule change could allow U.S. land access and ownership to be auctioned off to "the highest foreign bidder, including to hostile regimes that clearly do not have our best interests at heart."

The SEC said on Dec. 21 that it has initiated proceedings to determine whether or not the rule change should be approved and is seeking additional commentary on the proposal before making a decision.Tie

Write to Dean Seal at dean.seal@wsj.com

(END) Dow Jones Newswires

December 29, 2023 12:22 ET (17:22 GMT)