• World Climate Foundation

Beyond climate: it’s time for investors to protect biodiversity

By Mélissa Bourassi, Sustainability Analyst, Allianz Global Investors

Summary

Part one of COP15 ended with optimism that biodiversity can be put on a path to recovery by 2030. It has never been more important for investors to play a role in protecting and promoting the world’s natural capital.


Takeaways

  • Biodiversity is falling fast, with little action being taken yet to tackle the crisis

  • It’s not too late, though, and there is a good chance of political consensus for action

  • Investors can play their part by integrating biodiversity factors into their investment processes and backing innovators


While the 2021 United Nations Climate Change Conference, known as COP26 [1], needs no introduction, its “biodiversity” equivalent is less known. Yet the UN Biodiversity Conference (COP 15) that began in October 2021 is equally important and is primed to set new goals for conserving and protecting the world’s natural capital. At last, the biodiversity crisis is moving out of the shadow of climate change with which it is interlinked.


The timing is not a moment too soon, as the pressure on our ecosystems is increasing exponentially. Can we imagine our Earth without biodiversity? Indeed, what will happen if we continue to underestimate all that nature provides us with?


We believe that climate change and biodiversity loss should be tackled together, and that sustainable finance can help to tackle both. They both classify as “planetary boundaries” – the nine boundaries that humanity must respect and protect to maintain life on Earth. Investors have an opportunity to participate in the transition towards not just a zero-carbon economy but also a nature-positive system.


Biodiversity in crisis

The natural world is in unprecedented decline. More than one million species are under threat, plastic pollution threatens about 66% of the marine environment and plant species have declined by about 50%. Humans are mostly to blame, as we change land and sea use, exploit organisms through activities such as fishing, pollute widely, introduce invasive alien species, and emit greenhouse gases.


To put it simply, we are consuming Earth’s resources faster than it can replenish them. The good news, though, is that there is still time to reverse the trend for future generations.



There are reasons for hope. Importantly, a coordinated policy response is expected from COP15, where the draft of the post-2020 global biodiversity framework[2] should be adopted. Further, the Taskforce on Nature-related Financial Disclosures (TNFD) was launched in June 2021 to establish an international reporting framework that will allow investors to understand nature-related risks, impacts and opportunities, aiming to repeat the earlier success of the Taskforce on Climate-related Financial Disclosures.


Aligning biodiversity and climate ambitions through investment

Alongside these initiatives, investors can act as agents of change. Indeed, there are strong financial reasons for integrating biodiversity factors into the investment process, alongside climate change, as risks associated with degradation of nature can directly reduce returns. Engaging with companies helps to ensure that they formalise commitments to protecting biodiversity and apply them across their operations. In case of severe controversy or failed engagement, as defined by the United Nations Global Compact (UNGC) framework[3], exclusion of companies from an investment portfolio can be considered.


Responsible investors can require more disclosure from companies about their impact on natural resources, so raising their awareness of the obligation to protect delicate ecosystems. As planetary boundaries are one of our core sustainability themes, Allianz Global Investors is committed to increasing engagement on biodiversity, especially requesting greater data availability.


Beyond engagement, investors have opportunities to support innovation in fields such as carbon sequestration, the circular economy or regenerative agriculture. The UN Convention on Biological Diversity, in the new global biodiversity framework being considered at COP15, highlights the need for finance, stating: “adequate financial resources to implement the framework are available and deployed, progressively closing the financing gap up to at least US $700 billion per year by 2030.”


Urgent rallying cry

While COP26 is rightly regarded as a critical moment for policymakers to turn their words on the climate crisis into action, the same is true of COP15 for biodiversity. Awareness of our ecosystem’s steep decline is growing. As scientists have warned for many years, the challenges of climate change and biodiversity are interlinked. Both represent threats to the wellbeing of human society that must be tackled urgently. As investors everywhere consider the question of how to invest sustainably, analysis, data and engagement around climate and biodiversity will be essential to the answer.


Find the original article on Allianz GI's website

 

[1]The 26th session of the Conference of the Parties (COP 26)


[2]The UN Convention on Biological Diversity (CBD) released in July 2021 the draft of the post-2020 framework that will be adopted in the 2nd part of the COP 15, to define targets and pathways to preserve and protect nature and its essential services for the next decade and beyond.


[3] Biodiversity is considered in principles 7, 8 and 9 of the UNGC.


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