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FORWARD THINKING | ARTICLE – 2 Min

Biodiversity Day 2021 – A focus on the natural imperative to survival

In this article:

    For decades, mankind has been seen as the main culprit for biodiversity loss. Now, it is time for us as individuals, but also for businesses, investors, governments and communities to step up in line with the theme of this year’s International Day for Biological Diversity on 22 May: “We are part of the solution.”

    In its G7 report “Biodiversity finance and the economic and business case for action”, the OECD points out that ecosystem services, such as crop pollination, water purification, flood protection and carbon sequestration are vital to human well-being. Worldwide, such services are worth an estimated USD 125-140 trillion a year, which equates to more than 150% of global GDP.

    Yet human pressures are undermining the very biodiversity upon which these ecosystem services rely. The OECD’s report stresses that not acting on biodiversity loss would be a costly mistake. Between 1997 and 2011, the world lost an estimated USD 4-20 trillion a year in ecosystem services owing to land-cover change and USD 6-11 trillion per year from land degradation.

    Action to halt and subsequently reverse biodiversity loss should be scaled up dramatically and urgently. Biodiversity protection can be seen as fundamental to achieving food security, reducing poverty and bringing about a more inclusive and equitable development.

    A compelling business case…

    The business case for scaling up action on biodiversity is both obvious and compelling. Businesses affect biodiversity and depend on it. Biodiversity loss related risks to business include ecological risks to operations, liability risks, and regulatory, reputational, market and financial risks.

    Acknowledging and measuring these dependencies and impacts on biodiversity can help businesses manage and prevent such risks, while harnessing new opportunities.

    …and an attractive investment case

    In the context of avoiding risk, in its discussion paper “Investor action on biodiversity”, the UN’s PRI (Principles for Responsible Investment) argues that it is critical that investors act to halt the loss of biodiversity. Each element of biodiversity that is lost reduces the quantity, quality and resilience of ecosystem services. That can mean risks to investors across many sectors.

    The PRI suggests it is critical for investors to clearly understand the impact that biodiversity loss might have on the risk-return profile of investments as well as an overall portfolio. For example, exposure to certain sectors may lead to assets becoming stranded, if not properly managed.

    The World Economic Forum’s New Nature Economy Report II, The Future of Nature and Business argues that, with over half of global GDP, USD 44 trillion, potentially threatened by nature loss, the world’s economy needs a ‘Great Reset’ – a transition to a nature-positive economy.

    The WEF believes this can be a win-win for nature, people and business. An estimated USD 10 trillion of business opportunities can be unlocked by transforming the three areas responsible for almost 80% of nature loss:

    • Food, land and ocean use
    • Infrastructure and the built environment
    • Energy and extractives.

    The WEF estimates that USD 2.7 trillion per year through to 2030 will be needed to scale these transitions. Technological innovation is seen as critical to 80% of the opportunities identified.

    Investors seeking opportunities in this area can find well-measured, diverse and transparent thematic investment strategies such those developed by BNP Paribas Asset Management, whose current thinking is detailed in its biodiversity positioning paper. [1]

    READ SUSTAINABLE BY NATURE: OUR BIODIVERSITY ROADMAP


    [1] Also see “BNP Paribas Asset Management and CDP have entered a partnership to explore and support the development of common biodiversity corporate reporting metrics. With BNPP AM’s backing, CDP will start to develop a common, globally relevant corporate biodiversity reporting framework that accelerates action on nature within the private sector.” More here


    Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here 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 hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is 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, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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