Feature
What is the point of wasps? They appear to be nothing but an irritant. They can make it almost impossible to enjoy an ice cream on a sunny day and they have a sting. But there is more to them than this.
When they are not bothering you, when you do not notice them, they are playing an important role in sustaining life on our planet.
They are pollinators who make it possible for plants and crops to grow. They also eat the pests that damage our crops. Without wasps and bees there would be less food in the world. Wasps are insects and insects, along with other animals, plants, fungi and microbes, make up the natural world, and are collec- tively known as biodiversity. These species and organisms work together to support our lives by providing food, freshwa- ter, clean air and medicines.
The problem is that, as we have developed the built environ- ment, invented more efficient ways of traveling and with grow- ing demand for energy and consumables, the impact on the natural world has been huge. Cutting down trees, tarmacking green spaces, overfishing and pollution have been the main drivers of biodiversity loss, result- ing in natural disasters, a lack of freshwater, rising instances of disease and soil which you cannot grow crops on. Our support system is no longer supporting us in the way that it should. The depth of the issue is highlighted in a report by the World Wide Fund for Nature (WWF) and the Zoological Society of London. It found that the world’s wildlife populations shrank by 69% between 1970 and 2018. Freshwater species have seen the greatest overall global decline during the period at 83%, the report says.
Hand in hand
Cutting greenhouse gas emissions from portfolios is a popular policy for institutional investors. It dominates their responsible investing priorities. However, this is changing. Biodiversity is coming more into decisions about protecting the environment as investors are realising that we cannot address global warming, in isolation. Tackling biodiversity loss is part of the solution. A changing climate threatens the natural world, while biodi- versity loss exacerbates climate change by reducing the ability of ecosystems to remove carbon from the atmosphere. It is becoming clear to asset owners that there is more to the envi- ronment than climate change. “For the past few years, greenhouse gas emissions have been the focus, but biodiversity and deforestation are increasingly coming to the fore,” says Amelia Tan, Legal & General Invest- ment Management’s head of responsible investing strategy.
A deeper look It appears that biodiversity’s time has come. “At some point, we 24 February 2023 portfolio institutional roundtable: Biodiversity
have to stop saying this issue is on the horizon and get into the nitty gritty,” says Therese Niklasson, head of sustainable investment at Newton Investment Management. “I have picked up on more practical work coming into the mar- ket around frameworks and applications for how to think about biodiversity. That should take us forward. “If we feel that climate change is tricky, this is another beast, but it is important,” Niklasson adds.
The move to start tackling this beast could be the result of investors examining environmental, social and governance (ESG) factors in a greater level of detail. Hannah Skeates, co- head of sustainable investing at Allspring Global Investments, believes that “in the detail” is a phrase we could hear regularly when discussing ESG in 2023. “There is a lot we are aware of from a sustainability perspec- tive, but we are getting more sophisticated, more into the detail about what it means, what the implications are and for whom,” Skeates says.
Thinking about the issues affecting nature and biodiversity, such as water, deforestation and agriculture, in detail means considering the impact by location, an economy’s dependency on nature and how to supply more information to investors. “We have seen the climate-related impacts from water shortages and the link to a society’s ability to produce food. Nature pro- vides solutions to climate in tandem with the shift to a net-zero economy as well as supporting our everyday lives,” Skeates says. “2023 is likely to bring a much wider investment industry understanding of the scale of the dependencies and impacts on nature, and its importance to us,” she adds. “We will have more detailed
discussions around how sustainable investment
relates to natural assets across the realms of freshwater, marine, land and atmosphere.”
This means mapping pollution and the degradation effects as well as looking at the physical climate risks locally. “Practically speaking, that means understanding deforestation in a different level of detail, or what actions are occurring in biodiverse-sensitive areas, and what transforming those inter- actions looks like as a part of these wider industry transforma- tions,” Skeates says. “We are going to get to a different level of understanding around how finance can link to conservation and appropriate restoration efforts,” she adds. “So, taking more holistic approaches in how to think about the potential investment connections to restoration.”
Many issues, one theme
The opportunities and risks linked to biodiversity come in many forms. Indeed, Caroline Ramscar, head of sustainable solutions at Legal & General Investment Management, is see- ing interest from investors in tackling water pollution.
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