How can the investment industry cope with the biodiversity crisis?


As we see today in most nature documentaries, biodiversity is in crisis. As we enter the United Nations Decade for Ecosystem Restoration with a deadline of 2030 to reverse ecosystem degradation and achieve the United Nations Sustainable Development Goals (SDGs), time is running out.

Governments have did not achieve any of the objectives to prevent the loss of flora and fauna set in 2010. The one-year delay for the UN conference on biodiversity COP 15 – initially scheduled for last October – means that it is even more important for the private sector to help solve the problem.

There are good reasons to do so. In addition to the intrinsic value of biodiverse and functional ecosystems, they underpin a large part of our activities. The emblem of the United Kingdom Dasgupta review economics of biodiversity stresses that our long-term prosperity depends on rebalancing our use of ecosystem services such as pollination, flood protection and CO2 sequestration, as well as on nature’s ability to provide them. to supply.

As a partner of the Natural Capital Finance Alliance Beyond “business as usual”: biodiversity and funding objectives The report notes, half of global GDP is at least moderately dependent on some form of ecosystem service. The degradation of these services creates a significant risk for financial institutions: from falling yields, default risk to increasing insurance liabilities. Simply put, the collapse of the ecosystem will lead to an economic collapse.

Where to concentrate the action?

These risks present opportunities. The financial sector can play a fundamental role in guiding the trillions of dollars needed to preserve and restore ecosystems. This can unlock several co-benefits. It is important to note that preserving biodiversity can go hand in hand with effective efforts to mitigate and adapt to climate change.

Figure 1: Companies and the markets in which they operate influence and depend on biodiversity and natural capital

Source: Natural Capital Financial Alliance, adapted from Natural Capital Coalition et al. 2018

Financial services companies can help by integrating biodiversity into broader financial strategies, but also by setting targets for disclosure, reporting and loss of biodiversity – especially for priority industries that depend on how biodiversity works or whose activities significantly affect it.

The Natural Capital Finance Alliance identifies these sectors as a priority for investors:

  • Agricultural production
  • Clothing, accessories and luxury goods
  • Brewers
  • Distribution
  • Electric utilities
  • Independent power producers and energy traders
  • Mining
  • Oil and gas exploration and production
  • Storage and transport of oil and gas

Adequately integrating biodiversity into performance measurement on environmental, social and governance criteria and in ESG reports can help prevent misallocation of capital. Initiatives such as the upcoming Nature-Related Financial Disclosures Working Group can provide additional support.

There are significant opportunities for investors in all ecosystems:

Life on earth

Pressures on land use resulting from activities such as food production, which are at the center of UN SDG 15, can significantly affect biodiversity in terrestrial ecosystems. Chatham House Notes that the global food system is the primary cause of habitat loss.

There are ripple effects – to research estimates that end-to-end global food systems are responsible for 34% of greenhouse gas emissions, which in turn damage biodiversity by accelerating global warming.

There are opportunities to improve the global food system. Technology can play a big role – for example, companies can use satellite data to verify supplier impacts on deforestation. The intervention can accelerate the restoration of logged tropical forests and lead to faster CO2 sequestration. Drones can map forest areas and even support restoration by releasing seeds.

Another area with substantial innovation is traceability in the food supply chain. For products such as coffee, blockchain can help consumers and other stakeholders identify producers and their sustainability practices, while improving transparency.

The way we produce our energy can have a significant effect on biodiversity – even renewables can have their impact. Like research recently indicated, solar farms, for example, can be integrated in such a way as to have a positive impact on local biodiversity.

Below the surface

Aquatic ecosystems – targeted by SDG 14 – are under pressure from pollution, warming waters and overfishing. It is important to reduce these pressures: in addition to sustaining the lives of billions of people through the food supply, the oceans and the species that compose them have a fundamental role in the global carbon cycle to help regulate temperatures over Earth.

As major global initiatives such as the High Level Panel for a Sustainable Ocean Economy seek to regenerate ecosystems around the world’s coasts, there are significant opportunities for investors in areas such as reducing plastic waste, offshore wind energy, wave and tidal power, sustainable aquaculture and alternative maritime transport. propulsion technologies.

Sustainable habitats such as seagrass beds can contribute to biodiversity and carbon sequestration. Interestingly, these ecosystems can provide ecosystem services such as remove plastic from the ocean. There are opportunities to reduce plastic production or develop technologies to prevent waterways from washing plastics and microplastics into the ocean.

In our cities

Greening cities, which are home to the majority of the world’s population, can help sequester CO2 while improving urban air and overall well-being. To research suggests that the lack of biodiversity in cities could affect human health by limiting the microbes to which individuals are exposed, thereby hampering their immune system’s ability to fight disease. Preserving biodiversity therefore has health benefits.

There are significant opportunities to improve air quality and reduce operational and incorporated carbon by natural and technological means in the construction and transportation sectors.

These are just a few of the areas where the financial sector can transfer capital. To tackle biodiversity loss, timely action is essential to provide a better environment for people around the world and the species they share it with.

To learn more about the serious challenges and opportunities presented by biodiversity loss, read Sustainable by nature: our biodiversity roadmap.

All opinions expressed herein are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may have different opinions and make different investment decisions for different clients. This document does not constitute investment advice.

The value of investments and the income from them may go down as well as up and investors may not get their original stake back. Past performance is no guarantee of future returns.

Investment in emerging markets, or in specialized or small sectors is likely to be subject to above average volatility due to a high degree of concentration, greater uncertainty as less information is available. available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).

Some emerging markets offer less security than the majority of international developed markets. For this reason, portfolio transaction, liquidation and custody services on behalf of funds invested in emerging markets may involve greater risk.


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