Biodiversity becoming more crucial to investor policies, survey finds

Published 07:56 on March 24, 2023  /  Last updated at 07:56 on March 24, 2023  / Peter Kiernan /  Biodiversity

Biodiversity is becoming an issue of increasing importance to investors, a global survey released this week has found, with nearly half stating that addressing the issue was either at the centre of, or a significant factor in, their respective investment policies.

Biodiversity is becoming an issue of increasing importance to investors, a global survey released this week has found, with nearly half stating that addressing the issue was either at the centre of, or a significant factor in, their respective investment policies.

“Investors are becoming much more aware of the importance of biodiversity as part of the struggle against climate change,” an annual global climate survey from Robeco, a Dutch asset management firm, stated.

“By pointing to a positive impact from some of their investments, investors can demonstrate their commitment to biodiversity,” it added.

The survey was carried out among 300 institutional and wholesale investors, primarily in North America, Europe, and Asia-Pacific, with a total of around $24.7 trillion in assets under management, who were questioned on the themes of biodiversity as well as their approaches to decarbonisation, net zero, and just energy transition topics.

According to the Robeco survey, 48% of investors stated that biodiversity was either at the centre of their investment policy (10%) or a significant factor (38%) in it, a marked increase from 2021, when only fifth (21%) put biodiversity in these two categories combined.

In that year, only 5% of investors said biodiversity was at the centre of their investment strategy, and a further 16% said it was a significant factor in it.

“There is a growing awareness among investors that preventing biodiversity loss is inextricably linked to taking action on climate change. If global temperatures continue to rise, we are likely to see increasing environmental damage, from the increased severity and frequency of fires, storms, and droughts on land, or as rising ocean temperatures damage coral reefs and other aspects of marine life,” Robeco stated.

“At the same time, threatened ecosystems, such as rainforests, moorlands, and tundra, or coastal mangroves, can be important natural carbon sinks, absorbing and storing carbon.”

For these reasons, investors are increasingly paying attention to biodiversity, seeing it as an integral part of the shift to a low-carbon economy.

An illustration of this is the survey finding that nearly half (47%) of investors agreed that biodiversity loss is as great a threat as climate change, according to Robeco.

The survey also projected that in two years’ time, around two-thirds of investors will view biodiversity as either central to their investment strategy or a significant part of it, reflecting that the increasing level of awareness in the financial sector will increase over time.

There was, however, variation in emphasis on why investors in different regions were becoming more interested in addressing biodiversity.

European investors were more likely to want to preserve wildlife and ecosystems as a motivating factor, American investors were more inclined to see investment opportunities from the protection and restoration of biodiversity, and Asia-Pacific investors were more likely to want to be an early adopter on this issue in order to benefit from future regulations and policies.

Overall, 41% of investors said they were actively seeking investments that made a positive contribution to biodiversity.

The biggest factor cited by investors to take biodiversity into account for their policies was the commitment to reducing long-term systemic risks associated with biodiversity loss (41%), followed by demands from internal stakeholders (39%), demands from external stakeholders (36%), seeing biodiversity as the next challenge after climate change (32%), and preserving wildlife and ecosystems (32%).

Earlier this month, UN member states agreed in New York to a treaty that provides a foundation for protecting the parts of the world’s oceans that lay beyond national jurisdictions, building on the adoption of the Kunming-Montreal Agreement at COP15 in December, which set a framework to stop and reverse global biodiversity loss.

Nevertheless, despite the growing interest in biodiversity among investors there is a disconnect between the importance placed on it as an integral part of the solution to climate change and how it is a factor in their investment portfolios, the survey observed.

“For example, nearly two-thirds (64%) say there is a lack of awareness on the financial implications of biodiversity loss, although this has fallen from 79% in 2022. Furthermore, 55% of investors do not have a way to assess the impact of investment decisions on biodiversity (also down from 73% in 2022).”

Furthermore, if investors are to bring biodiversity into their investment decision-making process, some glaring needs must be addressed, according to Robeco, with 53% of investors citing the need for more suitable investment data, research and ratings, and 41% citing greater internal expertise.

“These issues are seen as among the biggest challenges for investors wanting to take account of biodiversity in their investment portfolio,” Robeco said.

The rising demand for impact investments making a measurable, positive contribution towards biodiversity-related goals is due to a number of developments beyond growing investor awareness, such as the introduction of more stringent regulations to assess and classify different types of sustainable investments, including the EU’s Sustainable Finance Disclosure Regulation(SFDR), according to the survey.

“Impact investments are likely to be classed as among the most sustainable investment funds or strategies going forward,” Robeco concluded.

By Peter Kiernan – peter@carbon-pulse.com

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