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Investing in biodiversity: A growing trend in the financial sector

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4 minute read

The financial sector is increasingly turning its attention to biodiversity-related financial instruments, reflecting a significant shift in investment priorities.

According to Robeco's annual climate survey of 300 global investors, the importance of biodiversity in investment policies has surged, with nearly half (48 per cent) indicating that it is now "significant" or "central" to their strategies — up from just 19 per cent two years ago.

This growing interest is not just a passive inclination; investors are actively seeking opportunities in biodiversity-oriented strategies within the next year.

The market has responded with various launches of thematic biodiversity equities investment products. However, questions linger about how these strategies effectively invest in biodiversity, how it's measured, and the criteria that define a positive contribution.

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In recognising the inherent environmental impact of most businesses, Lucian Peppelenbos, climate and biodiversity strategist at Robeco, noted, "Most businesses have an inevitable negative environmental impact."

This impact arises from natural resource consumption, energy use, greenhouse gas emissions, and habitat conversion. However, Mr Peppelenbos raised a critical question: Is it possible to invest in biodiversity?

While acknowledging the challenges of investing in biodiversity through listed securities, Mr Peppelenbos emphasised the need for a comprehensive bottom-up analysis to identify businesses contributing to improved outcomes.

A recent European Investment Bank study underscores the limited private sector involvement in nature-based solutions projects, with only 3 per cent having significant private sector investors.

To truly address biodiversity loss, Mr Peppelenbos argued for a focus on reducing key pressures such as deforestation, wetland drainage, fossil fuel use, and pollution. Drawing parallels to the successful recovery of the ozone layer following global agreements in 1987, he advocated for bending the curve of biodiversity loss.

“We know this can work, as evidenced by the recovery of the ozone layer. In 1987, governments worldwide agreed to ban nearly 100 ozone-depleting substances. This removed the key pressure, and as a result, the ozone layer has now recovered almost fully,” Mr Peppelenbos said.

Investors are urged to concentrate on companies driving a transition to reduce the environmental footprint, aligning with the Global Biodiversity Agreement's goal of no further nature loss by 2030.

While a growing investment universe exists for listed companies contributing to a nature-positive world, collaboration with large-cap companies and addressing unsustainable value chains are crucial for systemic change.

“We need more of these companies to achieve the scale of change needed, and to seriously increase their level of ambition and action,” Mr Peppelenbos said.

To ensure genuine commitment and avoid greenwashing, Mr Peppelenbos stressed the importance of measuring and assessing companies' contributions to biodiversity.

Robeco, in collaboration with WWF-NL, is actively working on integrating biodiversity into asset management, developing a systematic framework with key performance indicators.

In the quest for a nature-positive economy, Mr Peppelenbos encouraged investors to go beyond investing in individual companies and actively engage in encouraging entire value chains to become greener and nature-inclusive.

As Mr Peppelenbos concluded, this approach is pivotal in addressing the biodiversity crisis and steering the global economy toward a more sustainable future.

To read more from Mr Peppelenbos, click here.

Investing in biodiversity: A growing trend in the financial sector

The financial sector is increasingly turning its attention to biodiversity-related financial instruments, reflecting a significant shift in investment priorities.

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Maja Garaca Djurdjevic

Maja Garaca Djurdjevic

Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.

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