The biodiversity crisis: an investor perspective

“Our economies, livelihoods and wellbeing all depend on our most precious asset: Nature.” - The Dasgupta Review.

By 27 August 2021

With the recent delay of COP15, the UN biodiversity conference, there is a fear in the climate community that the foot is off the pedal in tackling the critical global biodiversity crisis. Since 1970 we have lost almost 70% of global biodiversity and the global economy is beginning to feel the impact. As investors, holdings in our portfolios both depend on, and are impacted by biodiversity loss and we are increasingly aware of the need to protect nature and the planet to mitigate these investment risks.

In this article we will examine the link between biodiversity and the economy, establishing the risks of biodiversity loss for investors before explaining the upcoming Post-2020 Global Biodiversity framework and showing what we, and other investors, are doing to help.

Investor risks of biodiversity loss

Earlier this year an independent, global study of the economics of biodiversity was published in the form of the Dasgupta Review. The review concluded that nature is an asset and one that is being overconsumed to the detriment of humanity. We need a shift in our understanding of biodiversity and to understand that our economies are embedded within nature, not external to it. The takeaway is simple: protecting nature is essential to protecting our economies.

Once we understand the link between nature and economy, we realise that biodiversity loss carries a huge risk for investors. In the US alone it is estimated that there is $44 trillion of economic value exposed by the biodiversity crisis. This is because nature is the ultimate supplier of our economies, and as we destroy it, or ruin its natural systems, we are effectively damaging our own supply chains.

"In the US alone it is estimated that there is $44 trillion of economic value exposed by the biodiversity crisis."

Halting biodiversity decline needs to be a priority for governments, business and investors alike. The risks to people and planet from biodiversity decline are huge; however, there is also a great opportunity to be had in protecting nature. Halting biodiversity decline can be a critical enabler of positive change for several other sustainable development goals: for example, clean water, good health and wellbeing and zero hunger.

What is the Post-2020 Global Biodiversity Framework?

The Post-2020 Global Biodiversity Framework is a unique global agreement that was due to be launched at the (now delayed) COP15 later this year. Its aim is to create the guidelines and ambition needed to develop global targets for tackling and ultimately reversing biodiversity loss, with a view to kickstarting a transformation of financial and economical systems to meet the UN Sustainable Development Goals.

Targets set under the framework must meet specific criteria, ranging from having to be science- based through to having  a local to global connection. A key feature of targets made through the Post-2020 Global Biodiversity Framework is that they must be explicit in their outcomes and also be measurable. The aim of this is to help counter greenwash and make it easier to track progress towards goals.

While the final framework is not yet finalised, the current draft - which will be discussed at a COP15 replacement video conference later this year - comes from a collaboration of experts, policymakers, business and investors. This will evolve during the conference with much feedback still to be discussed and incorporated.

Greenbank’s role

At Rathbone Greenbank Investments (Greenbank), we recently attended a workshop of financial sector experts looking to lay out a vision for how the financial sector could best contribute to achieving the objectives of the global biodiversity framework. This was an important opportunity for us as investors to make sure that the framework will be optimised so that financial institutions can easily understand it, and align with the goals that are produced as a result.

Biodiversity has always been an integral part of our investment approach, with habitats and ecosystems being one of our eight core sustainable development themes that guide the way we invest.

Last year we also joined the Partnership for Biodiversity Accounting Financials (PBAF). The partnership was formed in 2019 to improve biodiversity accounting in the financial sector and make accounting processes more standardised. We also signed the Finance for Biodiversity pledge last year. Perhaps one of the most impactful steps that investors can take, signatories are bound to collaborate and share knowledge with other institutions, engage with portfolio companies, assess the impact of their investments on biodiversity, set science-based targets and report publicly on progress.

"Biodiversity has always been an integral part of our investment approach, with habitats and ecosystems being one of our eight core sustainable development themes that guide the way we invest."

Through these organisations and pledges we have entrenched our position as biodiversity conscious investors and behind the scenes we are working hard to enhance our measurement framework and plan a programme of engagement on this topic, using the lessons learned through our partnerships.

Through our involvement we hope to shape investor action on biodiversity and encourage all investors to take these necessary steps to align their investment approach with the needs of the planet - needs which, as the Dasgupta Review has shown, are intrinsically linked to the health of our economy and investments.