Investors are increasingly recognising the critical importance of biodiversity loss given the threat it poses to businesses, investments, nature, and humanity. While the biodiversity crisis shares similarities with the climate crisis in its drivers and impacts, many investors have only recently begun to grasp its urgency and relevance. Just as greenhouse gas emissions and atmospheric concentrations serve as key indicators of climate risk, biodiversity is emerging as a crucial metric for assessing the health of nature. It is essential for investors to understand how to include biodiversity in investment decision-making, as well as how to disclose nature-related dependencies, impacts and risks to seize opportunities.  

We would like to thank all community members who participated in our Biodiversity Awareness Survey, and we are happy to present the results here along with commentary from members who are leading the efforts of the community in this space. 

“Biodiversity continues in its budding phase as an investment theme, following the 2022 Biodiversity conference and the emergence of TNFD. Biodiversity funds have recently launched, although size, strategies and approaches still limit its adoption as a core strategy by some investors”.  

Nyasha Mafoti, CFA, AVP, SSGA 

"The survey indicates that biodiversity is an emerging area within the investment sector, characterised by many unresolved questions. This situation presents both challenges and opportunities. We must rise to the challenge and harness the momentum we are observing in the field. While many investors are beginning to understand the importance of climate factors, the integration of nature-related considerations into investment decisions has lagged. The efforts by the Task Force on Nature-related Financial Disclosures (TNFD*) could be pivotal in changing this, acting as a catalyst for incorporating biodiversity concerns into mainstream investment strategies." 

Cedric Jirsell, CFA, Sustainability Analysis Director, Matter 


" Biodiversity is gradually emerging on the financial industry's radar screen. Climate change is already a major long term secular theme with its focus on GHG* emissions. Biodiversity is emerging as a related issue; its drivers are linked to climate change and in turn impact human economic activity, rapidly becoming included in the whole sustainability debate. The positive impacts nature and biodiversity can have on climate change - offsetting emissions, building resilience, and adapting to changes in climate - is becoming clear. The need to factor biodiversity into economic decisions is unavoidable as it will soon be considered mainstream."  

David Manuel, Founder, CFA, CIO, Beagle Partners  

 

How do you perceive the level of awareness and understanding of biodiversity-related investment opportunities within the investment community?

What factors, if any, have influenced your interest in or consideration of biodiversity-related investments?

Other: Corporate impact on biodiversity, Stewardship of Earth*

Biodiversity related investments have been driven by integration of ESG considerations by investors to mitigate biodiversity loss related risks and to capture opportunities from the protection and restoration of biodiversity. Growing consumer interest in this topic and the increasing calls for investee companies to have a moral obligation to impact positively on biodiversity have also been driving forces.

Nyasha Mafoti, CFA, Equity Portfolio Manager, AVP, SSGA

What are the primary challenges or barriers you have encountered when considering investments in biodiversity?

To what extent do you consider biodiversity in your investment decisions–making process?

What types of investment strategies or financial instruments do you find most effective for supporting biodiversity conservation or restoration efforts?

Other comments: 
Private credit focused on impact
There are pros and cons to all the above-mentioned strategies
Biomimicry

What are the key opportunities or potential benefits associated with investing in biodiversity in your view?

Other comment: We need to understand materiality* of biodiversity first

How do you assess the financial risks and returns associated with biodiversity-related investments?

Have you encountered any specific metrics or frameworks that have helped you assess the biodiversity impact of potential investments?

Other comments:
ENCORE*, which is now also used by S&P Global
Science Based Targets for Nature (SBTN)*
Water risk atlas* (WRI)

What additional support or resources do you believe would be beneficial for investors interested in incorporating biodiversity considerations into their investment strategies?

Sustainability Community Champions have also prepared Guide 101: Investing into biodiversity. Look out for your copy to download on the community’s platform.

*Abbreviations:
TNFD: Taskforce on Nature-related Financial Disclosures. TNFD framework provides fundamental concepts, definitions, and guidance to help organisations understand, assess and integrate nature-related considerations into financial disclosures. Read more here

BD: Biodiversity is all the different kinds of life you’ll find in one area – the variety of animals, plants, fungi, and even microorganisms like bacteria that make up our natural world. Biodiversity supports everything in nature that we need to survive: food, clean water, medicine, and shelter.

Biomimicry: A practice that learns from and mimics the strategies found in nature to solve human design challenges. Read more here 

ENCORE: A key tool for TNFD’s LEAP approach. ENCORE can help financial institutions take their first steps towards understanding their dependencies and impacts on nature. 
Materiality: Materiality is a fundamental principle of financial accounting from which a standardised solution of non-financial information can be based and provides an investment framework for investors. Unlike carbon emissions, where only the impact from companies is measured, biodiversity encompasses a concept called double materiality – an entity’s impact on natural resources and its dependency on natural resources. More on managing the double materiality for biodiversity and finance read here and here.

PPP: Public-private partnerships. PPP is a long-term arrangement between a government and private sector institution. Typically, it involves private capital financing government projects and services up-front, and then drawing revenues from taxpayers and/or users for profit over the course of the PPP contract. PPPs are successfully used in the infrastructure/renewable energy investments space. Building nature-positive public-private partnerships – read more here.

SBTN: Science Based Targets for Nature. Science Based Targets Network – a global coalition of 9-+ environmental non-profits and mission-driven organisations – has released corporate Science Based Targets for Nature. These targets on nature build on and complement existing climate targets that have been set by the Science Based Targets Initiative. They give companies guidance to know if they are doing their part towards realising the vision of an equitable, net zero and nature positive future. More details from SBTN here

SLB: Sustainability-linked bonds. SLB is a fixed income instrument where its financial and/or structural characteristic are tied to predefined Sustainability/ESG objectives. The objectives are measured through predefined Key Performance Indicators and evaluated against predefined Sustainability Performance Targets. Read more here

Stewardship of Earth: Stewardship of Earth are involved in shaping trajectories of social-ecological change at local-to-global scales to enhance ecosystem resilience and human well-being. Read more here

Water risk atlas (WRI): The global water risk mapping tool WRI provides catchment-level information on water-related risks and enables users to assess their exposure to water risk across multiple locations. The Atlas uses a robust, peer reviewed methodology and the best-available data to create high-resolution, customisable global maps of water risk. Read more here