Why investors include biodiversity on their balance sheet


Reprinted from GreenFin Weekly, a free weekly newsletter. Subscribe here.

Last summer, the investment arm of Northern Europe’s largest financial services group removed the Brazilian meat giant JBS from its portfolio. Nordea Asset Management, which manages approximately $ 280 billion, cited several reasons for the decision, including JBS’s connections to farms involved in Amazon’s deforestation.

“The exclusion from JBS is pretty dramatic for us as it comes from all of our funds, not just those labeled ESG,” said Eric Pedersen, head of responsible investing at Nordea The guard.

Until recently, investor demands for environmental impact have largely been focused on the climate crisis and greenhouse gas emissions. Now investors are starting to realize the threat of habitat destruction and biodiversity loss, and we’re seeing examples of actions that can be done with both carrots – like sustainability-linked loans tied to biodiversity metrics – and sticks Like the one Nordea beat JBS with.

Recent research from Leaders Arena ESG Advisory Services identified this institutional investors Managing stocks valued at more than $ 7 trillion take some biodiversity issues into account, including Allianz Global Investors, BNP Paribas Asset Management, and the California Public Employees Retirement System, better known as CalPERS. Both S&P Global Ratings and Bloomberg Biodiversity is among the top ESG topics for 2021, with the latter citing Fidelity International and AXA Investment Managers as examples of companies that have made them a priority.

Investors are aware of the threat of habitat destruction and biodiversity loss, and we are beginning to see examples of actions being carried out with both carrots and whips.

That said, as huge as it sounds, $ 7 trillion is just a fraction of the more than $ 100 trillion global assets under management. Most investors and corporations still don’t price natural capital or the cost of losing it, and biodiversity, which is becoming a top “topic” just means people have started talking about it.

Still, advances in this area could be faster than we’ve usually seen in ESG country for several reasons:

  • The coronavirus pandemic “has focused investors on the vulnerability and resilience of the financial system,” said a new report from the CFA Institute, an association of investment professionals that found that 85 percent of its members consider ESG factors when making investment decisions. The fact that the pandemic has shown in such a brutal way what can happen when we dive into the natural area could make habitat destruction and biodiversity loss particularly relevant to future investors.
  • A decade of pressure on companies Reporting on and reducing their contribution to climate change has created a kind of blueprint for investors to demand in view of the discrete but interrelated biodiversity crisis. Last summer, a coalition that includes the UN’s Environmental Funding Initiative and the World Wide Fund for Nature announced the Nature-related financial information task forcethat takes a page from 2015 Task Force on Climate-Related Financial Disclosuresand aims to create a framework for financial reporting on biodiversity and natural capital by the end of 2022.
  • Plenty of research Just uncovering the urgency and existence of the biodiversity crisis has raised awareness. In his Global Risks Report for 2021The World Economic Forum ranks biodiversity loss as # 5 risk in the world by likelihood and # 4 risk in impact. It is estimated that $ 44 trillion in economic value added, or more than half of global GDP, is moderately or heavily dependent on nature and its services. The most dependent industries: construction, agriculture, and food and beverage.
  • New metrics, as the suggested this week by the United Nations Statistical Commission that go beyond GDP and include natural capital. This measurement method, known as the Environmental Economic Accounting System – Ecosystem Accounting (SEEA – EA), would fundamentally transform economic and political planning in the countries that use it.

Given that we have less than a decade to face the double blows of climate change and biodiversity loss, and the fact that the technology to monitor and track things such as deforestation or overfishing is already in place, it can be slow Pace of progress go crazy.

The sale of Nordea came together with pressure from other institutions such as the Norwegian pension fund KPL to a commitment from JBS to use blockchain to monitor the entire supply chain through 2025, including the problematic “indirect suppliers” that have been linked to illegal deforestation. Still, these particular investors were not satisfied.

“JBS’s 2025 goal of tracking cattle is too far away. We need to act now,” Jeanett Bergan, director of responsible investments at KLP, told The Guardian. “It’s a positive move, but we need to see the detailed evidence in practice.”

Here are some other recent examples of the financial industry leading the way in the name of biodiversity.

  • Ossiam from Paris just has launched a global equity ETF that invests in food companies that strive to minimize habitat destruction and biodiversity. The Ossiam Food for Biodiversity ETF is listed on the Deutsche Börse Xetra and can be traded in euros or US dollars.
  • Bank of Ayudhya, Mizuho Bank and MUFG Bank syndicated last month a $ 400 Syndicated Sustainability Loan for Thai Union, one of the world’s largest seafood companies, which was twice oversubscribed. The interest rate on the five-year loan is tied to three key performance indicators. One of them is a new commitment by the company to achieve 100 percent transparency in its international tuna supply chain by 2025 through electronic surveillance and human observers. The company will pay a lower interest rate as long as it continues to make progress towards its targets, based on an annual baseline for 2020. Thai Union, known for tuna brands such as Chicken of the Sea and John West, has joined in the monitoring effort with The Nature Conservancy teamed up.
  • Finnish forest company UPM last year secured a revolving credit facility of $ 905 million at an interest rate tied to its ability to meet long-term climate and biodiversity goals. To get a lower rate, the company must demonstrate a net positive impact on biodiversity in its forests in Finland and a 65 percent reduction in CO2 emissions from fuels and purchased electricity between 2015 and 2030.
  • BNP Paribas, France’s largest bank last month pledged Stop funding companies that produce or buy beef or soybeans grown on land in the Amazon that were evacuated or converted after 2008.
  • Britain’s Prince Charles in January said he had founded the company Natural Capital Investment Alliance as part of his initiative for sustainable markets. The alliance – with founding partners HSBC Pollination Climate Asset Management, Lombard Odier and Mirova – aims to accelerate natural capital as an investment theme and to mobilize USD 10 billion in various asset classes by 2022.

The only undeniable fact in all of this is the facility’s limited resources. Let’s hope companies act more like an over-speed cheetah, of which about 7,000 remain, and less like a pygmy three-toed sloth, of which there are fewer than 100, for them and everyone else.


Comments are closed.