- Losing biodiversity will have irreversible consequences
- The COVID-19 pandemic is symptomatic of natural habitat loss
- Biodiversity is natural capital worth many trillions of dollars
World Environment Day is one of the longest-established focal points for environmental action. Since 1974, governments, businesses, organisations and individuals use the occasion to renew their efforts on a pressing issue. In 2020, that issue is biodiversity.
Biodiversity: fundamental to human life and economic activity
Human beings evolved during the most biologically diverse period in Earth’s history. Biodiversity is the foundation that supports all land and water-based life. It affects every aspect of human health, providing clean air and water, nutritious foods, scientific understanding and medicine sources, natural disease resistance, and climate change mitigation.
We rely on these ecosystem services. For example, 75% of worldwide crops of fruit or seeds depend, at least in part, on pollinators. Improving pollinator density and diversity boosts yields – pollinators affect 35% of global agricultural land, supporting 87 of the leading food crops worldwide.
Diversification is essential – in ecosystems as well as in investing
If there is a common understanding among new and experienced investors, it is that diversification can help mitigate risk. A broadly diversified portfolio is less volatile and more resilient than one that focuses on a particular issuer or sector.
On a vastly more complex scale, biodiversity plays a similar role in natural ecosystems. Biodiversity is resilience. Paradoxically, it is also fragile. As one recent study put it, “extinction breeds extinctions” as close dependencies between species on the brink of extinction mean that changing or removing one element of this web affects the entire life system with irreversible, adverse consequences.
The effects of human activity
We are now in the middle of the Earth’s sixth mass extinction. This one is unique, however. Human activity is driving it, including
- the destruction of wildlife habitats such as forests
- intensified agriculture involving the excessive use of pesticides
- the diversion and pollution of water resources
- unsustainable fishing practices
- fossil fuel-driven air pollution.
We have reached the point where it would take 1.6 Earths to meet the demands that we make of nature each year. If nothing is done, biodiversity loss will have severe implications, including the collapse of food, health and economic systems.
The emergence of COVID-19 underscores that when we defile biodiversity, we destroy the system that supports human life. Today, about 75% of all emerging infectious diseases in humans are estimated to be zoonotic, i.e. transmitted to people by animals. Land-use conversions and the wildlife trade are key suspects.
Biodiversity: the rootstock of natural capital worth almost twice the world’s annual GDP
Biodiversity is the natural capital resource we draw upon in most human activities, so the implications of its accelerating loss should be front-of-mind for investors. If we allow this to proceed on its current course, we will encounter a world human beings have never experienced before.
The value destruction that is underway is unprecedented. All global ecosystem services are estimated to be worth USD 125 trillion per year, equivalent to almost twice the world's total gross domestic product.
Although many industries engage in activities that depend upon these services, or affect them, corporate policies and practices to address biodiversity are relatively new.
At BNP Paribas Asset Management, we are working to raise awareness among institutional investors and companies of the critical importance of preserving biodiversity. The good news is that it is not too late to reverse course, but we must take action now if we wish to maintain current levels of prosperity and extend the benefits to the developing world.
What we are doing to help
Our focus is on delivering long-term, sustainable investment returns by:
- Integrating environmental, social and governance (ESG) considerations across our portfolios
- Carrying out our stewardship duties, through voting as shareholders, and public policy advocacy activities, and engaging with companies
- Applying responsible business conduct policies and product-based exclusions from investments
- Concentrating on three key issues: the energy transition, environmental sustainability, namely ending deforestation and preserving fresh water, and equality and inclusive growth
- Promoting the role finance can play in achieving a more sustainable world.
Here are a few recent steps we have taken to address the biodiversity crisis:
- In March, together Axa IM, Mirova and Sycomore, we asked research providers to develop a framework to allow investors to use biodiversity data in investment decisions. We developed an investor statement in support of this request, backed by investors managing USD 6.5 trillion.
- We have publicly communicated our deep concerns about the contributions of soy and cattle farming to deforestation, the need to preserve the biodiverse Cerrado region of Brazil and the need to take urgent action to prevent fires in the Amazon. A series of public investor statements on this was backed by trillions of dollars in assets under management.
- We have taken these concerns directly to key companies in our portfolios, leading dialogues with management teams in Europe, the US and Latin America.
- We have helped to convene discussions on a focused stewardship strategy around biodiversity with investors and leading scientists.
How investors can help
By allocating capital to strategies that integrate sustainability factors or that promote positive change. In this way, investors can target attractive financial returns while helping to safeguard the world’s natural capital – its biodiversity. Such actions support not only the environment, but also human life itself.
Discover the sustainable investment solutions of BNP Paribas Asset Management and read more about what sustainability means to us.
Read more about our Global Sustainability Strategy
Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.