Cinderella issue of biodiversity gets out of the pumpkin patch
New COP15 accord will compel fund managers to set a price to companies' exploitation of natural resources
A December 5 report published by the researcher identified only 14 funds with $1.6bn of combined assets that have strategies based on biodiversity. The biggest is managed by Lombard Odier, while Axa Investment Managers runs the second largest. Together, the two asset managers command 70% of the market analysed by Morningstar.Though Axa already has biodiversity strategies on its shelf, the COP15 agreement will help the fund manager go further, said Celine Soubranne, head of ESG development at Axa.
It will help 'obtain more data to integrate biodiversity challenges into our investment decision, and be even more active in financing protection and conservation of natural areas', she said.Soubranne praised the accord for acknowledging the role indigenous populations play in protecting biodiversity.Getting a foot in earlyFirms getting a foot in early include the asset management units of HSBC and BNP Paribas, as well as Fidelity, which all launched strategies during the last quarter that focus on biodiversity, according to Morningstar. Other major asset managers to offer nature-based funds include AllianceBernstein, Legal & General Investment Management and Schroders. Schroders and LGIM are among managers to 'most prominently' highlight the biodiversity risks of the food and clothing industries, the researcher said. Such strategies are vastly outnumbered by those focusing on climate, which include roughly 1,100 funds holding more than $350bn in global assets, according to Morningstar estimates. 'Clearly, there is a long way to go before biodiversity gains the same prominence as climate as a fund investing theme,' Stewart said.The huge gap between biodiversity and climate-themed funds in no way reflects the ESG risks that both the planet and its financial actors face in reality, according to scientists.
A key goal of the two most recent climate summits — the COP26 in Scotland and COP27 in Egypt — was to drive home the point that biodiversity is inextricably linked to climate.'Unless we stop treating these emergencies as two separate issues, neither problem will be addressed effectively,' World Wide Fund for Nature wrote in its Living Planet Report.The Global Biodiversity Framework agreed in Montreal will guide policy and funding over the next decade, with 'an important breakthrough' including the adoption of a target that calls on governments, industries and the finance sector to align their financial flows with the new framework, said Simone Lovera, policy director of the Global Forest Coalition. That means they will need to 'divest from harmful activities', she said.The next months and years will show how well COP15 will translate into action.'Whether the agreement from COP15 will act as a catalyst to see more funds flowing into nature will to some extent depend on how the broad goals and targets are translated into national legislation,' said Martin Berg, CIO of the Nature Based Carbon Strategy at Climate Asset Management. 'Meanwhile, the requirements for businesses are quite challenging, but because for the majority, they remain voluntary it will be interesting to see how many rise to the challenge.' With Nishant Kumar.BloombergMore stories like this are available on bloomberg.com