Biodiversity – challenge, opportunity or both?
Yet, as we have also seen with the climate crisis, solutions and transformative technologies are in development to combat the degradation. Restoring earth’s vital ecosystems will require us to move away from the take, make, waste economy currently to one that operates in harmony with nature. In the Age of Transformation, this will also present investment opportunities.
Policymakers are starting to recognise that restoring, protecting and preserving ecosystem services is critical, and technology is enabling new solutions, ranging from smarter agriculture to flood protection, that safeguard livelihoods and prosperity.
With all sectors of the economy facing various forms of systemic risk, as critical life-support systems are damaged or knocked out of equilibrium, harnessing these opportunities will present an array of challenges for investors. As with climate change, investors will need to consider how nature loss might translate into financial risk for companies and adopt effective corporate engagement and public policy advocacy to ensure this message is spread. They will also require in-depth knowledge and understanding across a broad range of new ecosystem restoration technologies to ensure they can identify the market-leading companies in this essential field.
- Aquatic ecosystems: help sustain the lives of billions of people, regulate the climate, produce oxygen and fuel the water cycle
- Terrestrial ecosystems: provide the basis for life through food supply, water, habitats for organisms and biodiversity
- Urban ecosystems: support all life on Earth, but are also the source of pollution
The companies offering solutions to these challenges often don’t focus on just one aspect, but span different sectors and geographies and aren’t necessarily listed as biodiversity loss companies (no companies are currently listed as such). Importantly, many of these technologies and companies still need to be scaled, creating an attractive opportunity for investors with the wherewithal to find and assess them in depth.
External data is often insufficient and lacks the level of detail needed by investors to tie specific impacts to an individual company – this needs to change. Collaborative engagement could also be an effective tool to addressing and assessing these risks, but investor-corporate dialogues on environmental issues tend to lack a sense of urgency. Companies should be encouraged to consider habitat restoration and afforestation commitments today.
These hurdles won’t be solved immediately, but collectively investors should start to ensure that their decisions are informed by biodiversity considerations, just as they are doing for climate change. The investment community can also use its influence to advance the understanding of biodiversity issues in the corporate community.
At BNP Paribas Asset Management, we believe a better world is one whose economic model is underpinned by a successful energy transition, is more environmentally sustainable and more equitable and inclusive. We recognise that we have an important role to play in ensuring a just and sustainable future for our clients and are integrating biodiversity considerations across our sustainability strategy and it will also be a core aspect of our stewardship work globally. Our sustainable product line now offers clients a range of thematic strategies focused on biodiversity themes, including the Blue Economy and Ecosystem Restoration. We are proud to embrace our role as a future maker – the risks may be great, but the opportunities are also immense.