How to help the world. Watch out for biodiversity.

The Financial Times said “There is no route to net zero without biodiversity” in an article dated September 19, this year.  

Biodiversity is the stock of renewable and nonrenewable resources like carbon, water, soils, species, communities, habitats, and landscapes. These resources include carbon, water, soils, species, communities, habitats, and landscapes. 

As well as referring to individual species, it includes ecosystems like forests and coral reefs that control the climate, pollinate crops, store carbon, and protect against floods. Reporter Harriet Agnew of the Financial Times says this will be the next big thing in responsible investing after climate change.

Scientists say that humans are destroying the environment, primarily through resource extraction, intensive farming, and climate change, causing the sixth major extinction of plants and animals in Earth’s history. 

Loss of biodiversity is nowadays considered just as bad as climate change, and investors are beginning to realize how important it is to help protect it. As a result, biodiversity is “now the fastest-growing environmental, social, and governance (ESG) theme in global capital markets,” says Catherine Howarth, chief executive of the responsible-investment group ShareAction. 

“Investors are addressing it in two ways: raising capital to put towards nature-based economic opportunities, and trying to analyze how portfolio companies are contributing to, or vulnerable to, biodiversity loss. ” 

Who are the game changers right now? 

Schroders, which manages £770 billion in assets, teamed up with Conservation International in July to invest in “natural capital” in Southeast Asia. Schroders bought a minority stake in data provider Natural Capital Research last year. 

King Charles of Britain created the Natural Capital Investment Alliance (NCIA), which launched at Davos in 2020. Climate Asset Management, Lombard Odier, and Mirova are the founding members. The NCIA has promised to “mobilize” at least $10 billion toward natural capital assets this year. 

The investment industry, according to ShareAction, still needs a lot of improvement. In its 2020 report, it said that only 11% of asset managers had policies that required companies in their portfolios to do less harm to biodiversity. The paper also found that none of the top 75 asset managers in the world had a policy on this.

It warned that biodiversity loss was often included in the general integration of environmental, social, and governance factors and not looked at on its own. 

One of the biggest asset managers in the UK, Legal & General Investment Management (LGIM), has written about how portfolios can be directly or indirectly exposed to biodiversity risk. 

Michael Marks, head of investment stewardship and responsible investment integration at that company, says that biodiversity is “a hugely material and systemic risk for investors.” There isn’t a standard way to measure and report on biodiversity, which is a problem for capital providers. 

Biodiversity revelations are becoming a part of ESG reporting, just as the Task Force on Climate-Related Financial Disclosures developed a framework for showing risks and opportunities.

So, chip in.

You won’t regret it.

References

Biodiversity is quickly rising up the ESG investing agenda, according to the Financial Times (2022, September 19). http://www.ft.com. Retrieved October 2, 2022, from https://www.ft.com/content/abbcec95-0154-40cd-83b9-d988bd3271b9