Can next generation solutions rescue the natural world?

The threads of our planet are coming loose. Our take-make-waste economic model is rapidly depleting the earth’s natural resources at an unsustainable pace. As with climate change, this is a manmade crisis that we have both an obligation and an opportunity to resolve.

While the world around us is intrinsic to how we live our lives, it is also fundamentally embedded in economic growth and prosperity – linking it to the health of our investments as well as our ongoing well-being. It is crucial that the investment world promotes the benefits healthier ecosystems can provide and explores how it can play a more active role in encouraging the world of commerce to preserve, nurture and rehabilitate earth’s resources.

Next generation solutions are also providing a pathway to improved sustainability. Innovations will not only play a prominent role in delivering a greener future but could also present exciting, impactful investment opportunities.

Beyond the plight of the bumble bee
It may seem counterintuitive that something as formidable as the global financial system could be vulnerable to the loss of something as small as a bee, but this neatly illustrates just how underappreciated and undervalued our natural assets are.

Bees are more than mere providers of honey; they play a critical role in human nutrition and the health of the ecosystems they support. If bees and other insect pollinators disappear, so will the birds that eat them and the plants they pollinate. Thus begins a chain reaction, with severe implications for global food production, including soil health, water purification, pest and disease regulation, and a wide range of other ecosystem services that these species provide to humanity, free of charge. This intersection between economic health and nature loss will be a key investment theme going forward.

Protecting the horseshoe crab
The horseshoe crab is a less well-known species in need of protection from human impact and exploitation. A factor in the copper-rich blue blood of these creatures is highly sensitive to bacterial endotoxins. As a result, it has been used for decades in biomedical safety testing. Globally, virtually every vaccine (including COVID-19 vaccines), injectable drug and medical device implanted in the human body relies upon the humble, 450 million year old horseshoe crab.

Yet, although these crabs are returned to the ocean after being ‘bled’, many subsequently die. The four species of horseshoe crabs are therefore declining, with the three Asian species already designated as being endangered. Their loss threatens coastal ecosystems, specifically other species that depend on their eggs for food, like migratory birds. Thankfully, a synthetic alternative is available, and has been approved by many regulators, that has proven to be just as effective as the test based on horseshoe crab blood, but greater uptake is needed. While some pharmaceutical companies have stopped using the tests made from horseshoe crab blood, most haven’t and need to be encouraged to transition to this widely approved synthetic alternative.

Using bioscience to tackle biological challenges
Chemical solutions, or pesticides, in agriculture have long been used to kill the invading organisms that feed off crops. In addition to killing insects and weeds, pesticides have proven to be toxic to other organisms including birds, fish and beneficial insects such as pollinators.

In recent decades, a ‘systemic’ approach has been used which involves coating seeds with pesticide so that the plant absorbs the chemical and incorporates it into its structure – thus poisoning any species that ingest it but not affecting other insects in the area. While this sounds like an improvement in theory, research has shown that only around 5% of the substance is actually taken up by the plant, with the remainder ending up in the soil or permeating water sources1 creating widespread biosystem damage.

Rather than relying on such damaging chemical solutions to tackle what is essentially a biological problem, bioscience advances are seeking to use RNAi technology – the same molecule used to rapidly produce Covid-19 vaccines – to create a radically different approach to pest control.

RNA serves as the translator or messenger that interprets the genetic code of every living organism on the planet and tells them what to do and how to behave. RNA interference (RNAi) can provide an effective alternative for controlling pests as it is extremely precise and can target a specific pest while being harmless to all of the other insects and biodiversity that live in the surrounding environment.

These biological solutions are as effective and inexpensive as chemical alternatives and can be produced at the same scale – AND they are safe. However, so far commercial usage is small and production must be scaled up to deliver its potential impact.

Pulp non-fiction
Deforestation is one of the most prominent drivers of biodiversity loss. COP26 saw many nations join forces to accelerate global efforts to end deforestation and many companies have issued deforestation commitments. Yet, the problem is growing. Brazil’s Amazon experienced its worst deforestation rate on record during the first half of this year2. Given the recent change in Brazil’s leadership, hopes for more concrete progress are likely to be discussed further at the COP 15 event on Biodiversity in December 2022.

While a significant amount of deforestation is caused by land clearing for agricultural purposes, trees are also felled in great number for commercial purposes. A wide spectrum of agribusiness use the fibre from trees, such as pulp for paper production and the manufacturing of viscose. Next generation technologies have been developed that directly tackle the systemic drivers of this destruction. By utilising smarter design and diversifying the fibre basket through newly developed, innovative solutions, these businesses use less virgin fibre in their production chains.

Such next generation solutions take products that are generally seen as waste – agricultural harvest waste that is otherwise burnt, old textiles that are left to degrade on landfills and even microbes growing on leftover food – and recycle them into blended manmade fibres. Such methods not only reduce waste, but they have a much smaller ecological footprint than virgin wood fibres and require less water and energy for processing.

Again, these burgeoning technologies need funding and corporate support to maximise the impact of their potential.

Financing the future makers
These potentially game-changing solutions are just a few examples of how commerce and nature can combine to tackle the world’s many climate and biodiversity challenges. Yet, such future makers will only succeed through the provision of funding to achieve the necessary scale to live up to their potential, as well as the promotion of these alternative and sustainable business practices across the industrial community.

Government policy and philanthropic funding can help drive this transition, but asset managers are strongly positioned not only to direct investment to nurture the companies behind sustainable innovations, but also to influence the management of companies. Engagement to encourage them to challenge existing business models, introduce more sustainable practices, as well as holding them to account for achieving their declared sustainability targets ,is critical.

For the asset management industry, these actions are self-serving. A sustainable economic future will rely on sustainable business practices and those pioneering change now are more likely to be among the winners of tomorrow and should generate healthy profits along the way.

At BNP Paribas Asset Management, we recognise that this notion is more than just a passing trend; it is supported by a growing number of institutional and retail investors who are looking for investments that combine financial performance with a positive impact on the world.

We believe that, as asset managers, we can and should invest in and engage with companies that can help to shape the world around us. To that end, we are already engaging with companies on a number of biodiversity topics including encouraging pharmaceutical companies to end their use of horseshoe crab blood, and limiting the use of systematic pesticides in favour of biological solutions.

Addressing companies’ environmental, social and governance (ESG) risks and impacts will help to promote greater market stability and more sustainable long-term growth while delivering equivalent, or better, financial returns. We therefore collaborate with our clients and financial sector peers to achieve what should be a joint aim: a sustainable future.

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