This is a sponsored article from Natixis Investment Managers.
Sustainability experts at Mirova (an affiliate of Natixis Investment Managers) discuss why biodiversity matters and outline the opportunities for investors who want to have a positive impact on our ecosystems.
Biodiversity refers to forests, oceans and other ecosystems, as well as efforts to protect them. It is vital because processes such as the nitrogen and carbon cycle are impossible without a variety of organisms existing and being involved at every stage, while ecosystem processes such as pollination and flood prevention are inextricably linked with life on our planet.
Investing in biodiversity involves mobilising sustainable finance for the conservation and restoration of natural habitats, as well as promoting sustainable practices. The landmark deal struck at COP15 in December 2022 has paved the way for new regulations and increased investor demand. Yet estimates of biodiversity funding needs by 2030 point to a shortfall of US$598 to US$824 billion every year1.
By comparison, US$632 billion is mobilised annually for climate-related projects2. However, it is important to point out that biodiversity loss and climate change are intrinsically linked. So, while biodiversity loss fell out of the World Economic Forum’s top 10 most pressing risks list for the next two years, a trade-off between climate and biodiversity is disingenuous.
As the report highlighted: “Without significant policy change or investment, the interplay between climate change impacts, biodiversity loss, food security and natural resource consumption will accelerate ecosystem collapse, threaten food supplies and livelihoods in climate-vulnerable economies, amplify the impacts of natural disasters, and limit further progress on climate mitigation.”3
How to take advantage of the opportunities and tangibly invest in biodiversity?
For investors who want to have a positive impact on our forests, oceans, and other ecosystems that make our planet thrive, here are three possible ways to invest:
- Natural capital. Nature-based solutions – also called ‘natural capital’ investments – include investments in sustainable land use, such as land restoration/rehabilitation activities, and those that focus on sustainable supply chains. They also cover environmental assets, like payments for ecosystem services, the conservation of biodiversity-rich areas, and carbon credits. In this space, investment opportunities are also found in the blue economy, which includes sustainable seafood supply chains, the circular economy, and the conservation of marine and aquatic environments.
- Sustainable equity. There are also a number of companies that can have a positive contribution to biodiversity. For instance, there are companies that evidence a positive impact on biodiversity as measured by the Science-Based Targets for Nature (SBTN) typology of positive impact4. The focus could also be on companies that either contribute to energy efficiency and renewable electricity production or that support acceleration in land use contribution to the net removal of carbon. This includes increased carbon sinks, reduced emissions of methane, and reduced emissions of nitrogen oxide which have strong global warming potential5.
- Green bonds. Fixed income solutions can have a positive impact on biodiversity too, primarily by ring-fencing investments in corporate green bonds. Green bonds are comparable to conventional market bonds in that an issuer of a green bond pays the principal and interest (coupon) back to the lender over a designated period of time. The difference is that the proceeds of the green bond issuance go towards financing projects that contribute positively to the environmental and energy transition. Green bonds can finance a combination of nature-based solutions and smart technologies. For example, renewable energy developers operating offshore wind farms that mitigate climate change through brown-to-green power substitution, the creation of habitats, and contributing to marine biodiversity on mills’ artificial reefs.
In short, there are a number of compelling investment opportunities in the biodiversity space. And we are already making progress: Bank of America estimates that global assets in biodiversity-related investments may rise 20-fold to more than US$400 billion by 20306. Moreover, there will be even more ways to invest in biodiversity in 2024… watch this space!
Find out more about how to invest in biodiversity and our sustainable investing strategies ➜ From mitigating risk to investing with a positive impact, our 15+ specialist affiliates can provide bespoke solutions. Sustainable Investing: one goal, many paths.
Mirova is an affiliate of Natixis Investment Managers that is dedicated to sustainable investing, and forms part of our Expert Collective.
1. Source: Financing Nature: closing the global biodiversity financing gap, 2021, Paulson Institute, https://www.paulsoninstitute.org/conservation/financing-nature-report/
2. Source: Global Landscape of Climate Finance, 2021, Climate Policy Initiative, https://www.climatepolicyinitiative.org/publication/global-landscape-of-climate-finance-2021/
3. Source: WEF Global Risks Report 2023, https://www.weforum.org/reports/global-risks-report-2023/digest
4. Source: Science-based targets for Nature: Initial Guidance for Business”, 2020, SBTN https://sciencebasedtargetsnetwork.turtl.co/story/science-based-targets-for-nature-initial-guidance-for-business/
5. Source: Mirova 2023, https://www.mirova.com/en/ideas/mirova-for-nature-action-biodiversity
6. Source: Bloomberg, 2 May 2023 https://www.bloomberg.com/news/articles/2023-05-03/biodiversity-beats-climate-as-talking-point-for-republicans
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This is a sponsored article from Natixis Investment Managers.