Why biodiversity is about to go mainstream in ESG investing
- Media Manager
- Oct 26, 2023
- 2 min read
Reuters
Written By: William Attwell
Published: October 26th, 2023
Biodiversity and nature are as critical as climate change for determining humanity’s long-term prospects, but until now they have played a relatively minor role in sustainable investing. That’s changing. Biodiversity and nature-themed funds are mushrooming, with assets under management in European funds targeting biodiversity quadrupling in the 12 months to September, according to data from the European Securities and Markets Authority, though admittedly these funds still represent a tiny fraction of the market.
Having barely featured on the environmental, social and governance (ESG) agenda a few years ago, pledges to become “nature positive” – a fluid term describing activities that restore and regenerate natural resources and ecosystems rather than degrading them – are now featuring alongside companies’ and investors’ net-zero climate targets. Demand for investment solutions and products to facilitate allocation capital to nature themes continues to grow (for clarity, nature refers to the whole natural world, while biodiversity refers to the living components of nature, although in practice the terms are often used interchangeably).
Last year’s United Nations biodiversity summit (COP15) in Montreal was a key inflection point. More than 190 countries committed to restore and conserve 30% of ecosystems by 2030, and to scale up biodiversity-related financing from public- and private-sector sources. Investor groups – such as Finance for Biodiversity, whose 153 members have over $21 trillion in assets under management – are advocates, and increasingly nature considerations are being integrated into financial institutions’ investment policies and engagement strategies. But this remains a long way behind climate factors. Policy measures, such as the European Union’s deforestation regulation and the UK’s biodiversity net gain (BNG) requirements for the real estate sector, are reinforcing market attention on these issues.
