A global coalition of investors representing approximately USD2.5 trillion in assets under management is urging governments to “take ambitious policy and regulatory action to halt and reverse global biodiversity loss”.
Five pension funds – AP7 (Sweden); CDPQ (Canada); the Church of England Pensions Board (UK); HESTA (Australia); and USS (UK) – are leading the initiative which calls on governments to set new national targets; implement mandatory disclosure on nature for companies; establish regulation that addresses the five drivers of biodiversity loss; and develop and scale financial mechanisms for nature.
Laura Hillis, Director of Climate and Environment at the Church of England Pensions Board, says: “The tragedy of biodiversity and nature loss will not be solved by waiting for the market in the absence of strong environmental policies and regulations. For us as stewards of long-term retirement savings, bold action from government holds the key to protecting long-term prosperity and wellbeing for our beneficiaries.”
The coalition demands ambitious national targets, nature-related transition plans and commitments to halt and reverse biodiversity loss, with a focus on transformation of key sectors, stopping deforestation, and protecting and restoring critical ecosystems.
The investors also call for mandatory disclosure regulations for companies with material nature-related impacts or dependencies, as well as nature-related transition plans, with metrics strongly tied to biodiversity outcomes.
Thirdly, they want to see regulation that protects nature and biodiversity for all sectors that contribute to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services’ (IPBES) five drivers of biodiversity loss.
And finally, they want governments to invest in the development and scaling of financial mechanisms to protect and restore nature and biodiversity.
The demands come amid the Convention on Biological Diversity (COP 16) Summit held in Cali, Colombia which aims to mobilise private and public finance to protecting the world’s ecosystems.
Ahead of the summit, Colombia’s Environment Minister and President of COP16 Susana Muhamad said that the event would ensure “biodiversity is [seen] as important, complementary, and indispensable as the energy transition and decarbonisation.”
Bertrand Millot, Head of Sustainability at CDPQ, says the summit must build on progress made at earlier biodiversity summits.
“Since COP15 and the 2022 Kunming-Montréal Global Biodiversity Framework, biodiversity is becoming an increasingly relevant factor in the financial sector. It is crucial to bring together stakeholders to support the transition to a more sustainable and resilient world and we need more proactive policies from governments – and greater collaboration between public authorities and private sector players – to accelerate progress in biodiversity preservation.”
Research from Morningstar reveals global assets held in biodiversity open-end funds and ETFs more than doubled over the past three years to USD3.7 billion, boosted by product development. There are 34 such funds on offer, all domiciled in Europe.
However, the research notes that despite its rapid growth, the size of the biodiversity fund universe is dwarfed by the USD520 billion climate fund market.
Further, biodiversity funds have underperformed, on average, “but showed resilience in the 2022 market downturn”.
Hortense Bioy, Head of Sustainable Investing Research at Morningstar Sustainalytics, says: “It’s still early days for biodiversity investments. Strategies to execute on biodiversity objectives have proved difficult to develop, partly due to a lack of reported corporate data and standard metrics and because biodiversity is at the intersection of other more easily investible and better-known themes such as climate change, water, and the environment.”
However, Bioy adds: “Biodiversity is an emerging topic that investors can no longer ignore both as a risk factor and as an opportunity, particularly in the face of a changing climate and declining global habitat.”
