In addition to the fight against climate change, Finance discovers a new and significant challenge in the preservation of biodiversity.
The worldwide degradation of biodiversity represents a significant challenge for humanity. WWF1 indicates that since 1970, the population of wild vertebrates has decreased by almost 70%. Similar to the IPCC2's reports on climate, the intergovernmental IPBES3 platform on biodiversity also sounds the alarm. The main factors responsible for the degradation of our ecosystems include changes in land and sea use, direct exploitation of species, climate change, pollution, and invasive species.
A multidimensional issue with health, social and economic consequences
The biodiversity crisis and the climate crisis are a joint-crisis. Beyond the interest for species and ecosystems, it is a matter of ecosystem services within a climate regulation prism. Our ecosystems play a central role in the absorption of carbon. Indeed, oceans and terrestrial ecosystems absorb nearly half of the CO2 emitted globally. By removing this CO2, they contribute directly to the mitigation of global warming.
The degradation of nature has health and social repercussions and the sustainability of economic models and of the financial system are also under threat. There are direct consequences on companies’ activities and inevitably on their revenues. It is estimated that 5 to 8% of current world agricultural production, representing an annual market value of USD 235 to 577 billion, is directly attributable to animal pollination.4
The biodiversity version of the Paris Agreements
The COP 15 on biodiversity, held from 7 to 19 December 2022 in Montreal, was highly anticipated after successive cancellations due to Covid. The political ambition was to replicate for biodiversity the mobilising effect of COP 21 that led to the Paris Agreement.
196 countries gathered around this common goal. After several months of intense negotiations, they adopted a historic agreement. This agreement defines a clear course and sets quantified and measurable targets to significantly reduce the loss of biodiversity. One of the key targets adopted is to protect up to 30% of the land and 30% of the sea by 2030. Other strong commitments include halving pesticides and excess nitrates, restoring 30% of degraded terrestrial and marine ecosystems by 2030, halving the introduction of invasive alien species, halting the extinction of protected species due to human activities by 2050 and eliminating harmful subsidies to biodiversity to the tune of USD 500 billion per year by 2030 to stop supporting activities that impact nature.
To ensure that all countries can implement these goals, the framework also sets a target of transferring USD 30 billion from the richest countries to the developing countries by 2030.
The regulatory framework is making progress and encouraging investors to act
Whether it is through the CSRD5 directive, or the Energy-Climate law in France, or the European Commission's "technical alignment criteria", these advances will enable all stakeholders (companies and investors) to have common references. This regulatory progress, whether at domestic or European level, combined with greater public awareness of these issues, must now be translated into concrete investment actions.
A pool of investment opportunities
From an investor point of view, our role is to assess how these criteria for respecting biodiversity are actually integrated by companies. First, this means excluding companies with negative impact. Then, investing to preserve biodiversity means choosing companies that offer solutions that contribute to reducing pollution, improving water quality or decreasing waste production, particularly through prevention and recycling. We now have a fairly good map of the impacts and dependencies of activities and sectors. This is why it remains essential to understand the fundamentals of companies’ activities and their sensitivities regarding biodiversity.
The fight against biodiversity loss represents a pool of opportunities, within which new solutions and technologies are emerging. According to the WEF6, biodiversity-related investments represent a potential market valued at USD 10 trillion per year, and nearly 395 million jobs by 2030. Companies positioned in this field represent real investment opportunities.
We are convinced that biodiversity preservation can become the new priority theme for sustainable investors.
1 World Wildlife Fund
2 Intergovernmental Panel on Climate Change
3 Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services
4 Source: IPBES
5 Corporate Sustainability Reporting Directive (scheduled to come into force on 1 January 2024). This directive will constitute a major step forward thanks to the harmonisation of extra-financial data published by European companies.
6 World Economic Forum