Biodiversity and investors (Responsible Investor)

Our key takeaway: Global biodiversity loss threatens a sixth mass extinction event. The first since the dinosaurs were wiped out 65 million years ago. Alarming? Yes. The data speaks for itself.  A total of 42,100 known species are threatened with extinction. An even greater number are at risk. The average decline in monitored animal populations since 1970 is 69%. And an area twice the size of the US has been deforested by humans since the last ice age. We depend on biodiversity for our survival. Companies depend on biodiversity for their survival. The sectors that are under the spotlight are those that have large impacts and dependencies on nature: the food and agriculture and mining industries in particular. And their investors. In the words of UN secretary-general António Guterres: “Businesses and investors must be allies of nature, not enemies.” A new report by Responsible Investors provides a lay of the land of where we are on biodiversity: the landmark agreement of COP15 is now creating ripples through investors and companies. Investors are getting prepared to “transparently disclose their risks, dependencies and impacts on biodiversity.” Nature Action 100 (NA100) will soon release the companies it is scrutinizing and engaging with on this topic. The Taskforce for Nature- Related Financial Disclosures (TNFD) will launch its final recommendations after the summer. Biodiversity may be further behind on carbon on investor and company agendas, but it is rapidly being invited to the table in recognition of hte multi- faceted crisis we are facing.  

Responsible Investor published Biodiversity Report 2023 (July 2023):

• The Crisis in numbers: In the words of editor Ben Payton: “It is now widely understood that the biodiversity crisis, alongside the interrelated climate crisis, is among the gravest threats facing the planet. Human activity is degrading soils, denuding rainforests, defiling oceans and decimating plants and animals. And investors are not innocent parties. Billions of dollars continue to flow into the hands of companies engaging in activities harmful to habitats and ecosystems.“ The report describes how global biodiversity loss “threatens a sixth mass extinction event – the first since the dinosaurs were wiped out 65 million years ago.” A total of 42,100 known species are threatened with extinction. An even greater number are at risk. The average decline in monitored animal populations since 1970 is 69%. And an area twice the size of the US has been deforested by humans since the last ice age.
  

• “COP15 produced a landmark agreement on halting nature loss”: The report describes how “Biodiversity has shot up the agenda to join climate change as one of the top priorities for ESG- conscious investors.” This reflects the policy shift, with biodiversity becoming a priority. “COP15 certainly delivered an ambitious agenda for protecting nature and setting the course towards a more sustainable use of the Earth’s resources. Among the key pledges in the Global Biodiversity Framework agreed at the conference was a commitment to protect at least 30 percent of the world’s land, inland waters, coastal areas and oceans by 2030. The loss of ‘areas of high biodiversity importance’ is to be reduced to ‘near zero’, while 30 percent of degraded ecosystems are to be restored.” When it comes to investors specifically, investors have “a target to require financial institutions to transparently disclose their risks, dependencies and impacts on biodiversity. The ultimate aim is to reduce the negative impact of investments on nature, and promote investment in ‘sustainable patterns of production.’” This in turn is triggering actions on the part of investors, seeking to “put in place strategies for disclosing their impacts on biodiversity and engaging with corporates to encourage nature-friendly practices.”
  

• Many actions ahead: The report delves into the many actions that are starting to take shape around biodiversity. “A plethora of initiatives have emerged over the past year as the investor community attempts to define a collective approach to biodiversity decline.” For instance, Nature Action 100 (NA100) co-chaired by non-profit Ceres and the Institutional Investors Group on Climate Change will engage “with major companies in key sectors that have the largest impacts and dependencies on nature” - the list of companies is to be disclosed later this year. The sectors that are under the spotlight are those that have large impacts and dependencies on nature: the food and agriculture and mining industries in particular. A number of investors are already engaging with corporates on biodiversity: pushing for certain targets to be met. “The leading firms have gone further by setting company-wide targets. Some companies aim to have a net-positive impact on biodiversity, and are employing new technologies to measure impact and progress.” When it comes to gathering data, “[t]here is no silver bullet for data dilemmas in this space. Impacts on biodiversity are not easy to quantify. They are even harder to aggregate and compare in a meaningful way.” “However, a major step in the right direction is expected in September, when the Taskforce for Nature- Related Financial Disclosures (TNFD) launches its final recommendations.”

‍