However, investors are awakening to the importance of biodiversity as damage to ecosystems such as coral reefs has a devastating impact on the global economy.
There are several reasons why climate change has become a central stage. Carbon emissions are easier to price than living on the ocean floor, and the financial industry is built on the trading of stocks and bonds.
However, companies and investors are more concerned about the significant economic risks resulting from the loss of biodiversity and the destruction of natural ecosystems.
“Biodiversity isn’t a new topic for investors in itself, but it’s gaining the same momentum as the climate change challenges a few years ago,” said Therese Niclason, Head of Sustainability at NinetyOne. rice field. Investment week..
“This, like climate, is related to the urgency of the problem, presuming a serious loss of biodiversity and better understanding its interrelationships with society and the economy,” she said. Added.
According to the World Bank, if countries continue to attack biodiversity, reduce wild pollution, reduce food from fisheries and lumber from forests, the global economy could lose as much as $ 2.7 trillion annually by 2030. there is.
The Intergovernmental Science Policy Platform for Biodiversity and Nature’s Services states that of the world’s 8 million species, 1 million are endangered in the coming decades.
The loss of biodiversity will be one of the greatest environmental crises in history, endangering the economy and society.
In many respects, Thomas Höhne-Sparborth, head of sustainability research at Lombard Odier, considers biodiversity risk to be a new ESG elephant in the room.
“The loss of biodiversity, and more broadly natural capital, undermines one of the most productive assets in our economy, increases the propensity for infectious diseases, and reduces the resilience of the environment to shocks. And represents financial danger, “he said.
For Union Investment ESG analysts Angela Kiroga, the problem is that they must first be able to be measured in order to remedy the problem. “Measuring biodiversity is more complicated than emissions, for example. If biodiversity is very difficult to measure, it can also be difficult to protect biodiversity and ecosystems,” she said.
Pricing for breathable air, drinkable water, acceptable temperatures, and the complex ecosystems that maintain them is complex.
Take a tree as an example. Pricing must take into account properties such as the emissions that trees segregate during their life cycle, the amount of oxygen they provide, and food and wood.
“All these factors can be estimated and may eventually reach an agreed value, but the price of wood does not represent the price or value of biodiversity,” Quiroga said. I am.
Höhne-Sparborth also emphasized the challenge of rare data.
“Many companies are beginning to report carbon dioxide emissions, but data on deforestation, water use, pesticide use, and biodiversity impacts have not yet been reported. In many cases, companies simply simply. I just don’t know, “he said.
Lombard Odie has relied on geospatial analysis to monitor changes in land use using satellites.
Focusing on COP26 in Glasgow, its unobtrusive sister COP15, the United Nations Decade on Biodiversity, was held last week in Kunming, China. It brought together diplomats, scientists and conservationists to lay the foundation for a global consensus to stop and reverse the destruction of nature. This will be finalized in May next year.
As countries begin to take biodiversity seriously, investors see biodiversity and climate change as both sides of the same coin and are beginning to follow suit.
“It’s getting the attention of investors,” said David Zahn, head of the European fixed income division at Franklin Templeton. “More and more clients want to know how they are working on biodiversity in their portfolios.”
The Paulson Institute estimates that an average of $ 722 billion to $ 966 billion per year will be required by 2030 to reverse the decline in biodiversity.
Martin Davis, CEO and President of the Westchester Group, said:
Investing in the doomsday
My-Linh Ngo, Head of ESG Investment and Portfolio Manager at BlueBay Asset Management, needs to consider the opportunities investors offer by taking a more responsible approach to addressing ecosystem degradation and species loss. Said.
“In the fixed income context, this is linked to investment in vanilla bonds by companies whose economic activity provides a solution to the loss of biodiversity, or green bonds and sustainability where capital is focused on conservation. It could mean investing in ESG-labeled issuance, such as bonds, if the project or commitment is related to biodiversity goals. “
UBSAM’s SI Research and Stewardship Team Karianne Bail-Lancee also emphasized engagement.
“”[Investors] You can vote to get involved in business management and uphold resolutions that strengthen biodiversity management (and to board members who cannot mitigate risk). You can exclude companies for specific reasons or focus on those that are actively contributing. “
Investors Awaken to Biodiversity Risk
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