Preserving biodiversity is urgent
Preserving biodiversity has reached a level of urgency that rivals the need to protect the climate. Investors can play a role by ensuring that the companies they invest in curb biodiversity loss or, even better, promote the coexistence of different life forms.
As part of its biodiversity roadmap, Dutch fund company Robeco is currently developing an investment framework that assesses positive and negative contributions of companies to biodiversity for all portfolios. In October, the financial house will launch a Biodiversity Equities investment strategy, as Lucian Peppelenbos, climate and biodiversity strategist explains. This is to identify companies whose activities benefit nature, such as reforestation and water resource protection.
"Our economy and our society are completely dependent on the biosphere, on ecosystems for their benefit", says Peppelenbos. If these ecosystems lose their efficiency, economic activities are also threatened. "This problem is more pressing than many people realize. It's already having a direct impact on the economy", Robeco strategy expert emphasizes.
Preserve vital ecosystems
For example, let's take a look at bees. In this case, parasites invade an ecosystem and multiply rapidly. This has been painfully experienced in Australia, where the Varroa mite has invaded hives and begun to kill off honey bees, explains the expert. A lockdown of bees was needed to prevent the spread of the pest. "This means that billions of dollars worth of crops in Australia are now at risk because pollination cannot take place."
Water is another ecosystem with vital benefits. The droughts seen on every continent this year are increasing the risk of crop failure and causing food shortages in parts of Africa. "But the impact goes beyond that,", Peppelenbos notes. "Water is also of fundamental importance for industry and transportation on rivers that are currently drying up. German industry, for example, suffered supply shortages due to low water levels in the Rhine River. Automakers in China halted production for several weeks due to power shortages. Water scarcity means immediate economic damage to many sectors of the economy."
What investors can do
So what can investors do to effect change?? Capital owners and asset managers do not have the power of governments. But they have the power to allocate capital. By doing so, and through active ownership and engagement, they can help make a difference, the Robeco expert notes.
"We can use dialogue with companies and redirect capital into solutions. This is what we will do with our new Biodiversity Equities investment strategy", he stresses. In addition, portfolios can be systematically targeted towards companies that, while not offering biodiversity solutions themselves, contribute to mitigating and reversing the loss of biodiversity.
This requires sound data and analysis, especially site-specific information. For the investment framework, which can be used for all Robeco products, the impact of companies on biodiversity is identified. Subsequently, the companies are ranked as some perform better than others.
Location analysis is important to the decision
"The problem with biodiversity is that it is highly site-dependent – far more so than greenhouse gas emissions." If you want to determine the impact on biodiversity as a result of certain economic activities or a company's supply chains, you need to analyze the site conditions, explains Peppelenbos.
Such site analyses are an important element of the Task Force for Nature-related Financial Disclosures (TNFD)-Framework. This is done in the area of biodiversity with the Task Force for Climate-related Financial Disclosures (TCFD) equate. Many asset managers, including Robeco, have joined the TNFD to disclose the companies in their portfolios.
Action is needed now
What is most urgent, however, is real action. "The most important thing for me is that we avoid 'analysis paralysis' and instead act now", Peppelenbos says emphatically.
"Three-quarters of biodiversity issues relate to land and sea use change and over-exploitation of natural resources. These are things that can be relatively well identified and assessed", he emphasizes.