By focusing on biodiversity, institutional investors are helping to tackle the climate crisis, says Jane Ambachtsheer, global head of sustainability at BNP Paribas Asset Management.
“When we talk about the biodiversity crisis from an economic perspective, we’re talking about a significant portion of global [gross domestic product], which is reliant on nature to some extent,” she adds, noting increasing catastrophic weather events that have impacted local economies have made risks associated with the biodiversity crisis more tangible for people to understand.
Indeed, according to Nature Action 100 group, an investor-led engagement initiative, hundreds of billions of dollars in global crop outputs are at risk annually from pollinator loss, posing operational risk for companies sourcing agricultural commodities.
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Over the past couple of years, more organizations and governments have turned their focus to the biodiversity crisis. Since 2022, the United Nations’ Kunming-Montreal Global Framework for Biodiversity has been under development, as well as a UN-backed global treaty that will address the production process of plastics.
“Over the coming year or so, as countries publish national biodiversity strategies action plans, we’ll have a lot more analysis looking at how close countries are getting towards achieving the global biodiversity framework’s targets, what pathways are they on, similar to the kind of sector decarbonization pathways that are being mapped out on the climate side,” says Ambachtsheer.
She notes institutional investors seeking to address biodiversity risk in their portfolios and on a global scale can begin to participate in the collaborative engagement initiatives available. “All investors are going to have some exposure to some of those target company names. Maybe there’s an opportunity to get involved and to participate in some of those engagements as a way to create capacity and gain deeper knowledge from a hands-on perspective.”
Additionally, investors can review their allocations to natural capital sectors, Ambachtsheer says, adding the market is anticipating a shift away from high-carbon building materials like cement, concrete and some plastics towards more focus on sustainable timber. “I think we will see a growth in demand for sustainable timber in terms of displacing some of those materials. Forestry is also a potential hedge against inflation. It’s naturally uncorrelated to a number of other asset classes that people will have exposure to.”
For its part, BNP has developed a six-pillar approach to sustainability that addresses climate, biodiversity and equality. The strategy includes outlining minimum standards for companies it invests in, with expectations for different sectors; stewardship through proxy voting and engaging with policy makers; and environmental, social and corporate governance research into investee companies’ impact and dependencies on nature and the resulting impact to their cash flows and viability from a fiduciary perspective. “We have a number of different data sources where we’re able to look at companies from different perspectives.”
BNP’s strategy also integrates sustainability into its range of products, including venture capital investment and thematic active and passive investments in private and public markets. But, it also includes “walking the talk” internally, says Ambachtscheer. “If we’re going to be credible in everything we’re asking companies and policy makers to do, we need to make sure that we’re doing all of those things ourselves — whether it’s a focus on diversity internally, volunteering and sustainable education across the whole platform.
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