BIODIVERSITY is fast emerging as a big concern for investors, as the world’s financial institutions grapple with how to measure and manage the ecological systems underpinning the planet’s economic stability.
Biodiversity — sometimes referred to as a “twin crisis” along with climate change — refers to the variety and variability of living organisms in an ecosystem.
Biodiversity provides us with food, water and other resources. It helps regulate the climate, protect us from natural disasters and provides us with new medicines and other products.
The United Nations regards land degradation and biodiversity loss as among “the most pressing environmental challenges facing humanity.
“Land degradation has reduced the productivity of nearly one-quarter of the global land surface, impacted the wellbeing of about 3.2 billion people and cost about 10% of annual global gross domestic product in lost ecosystem services,” the UN said in its 2019 Land Degradation Neutrality for Biodiversity Conservation report.
But historically, efforts at protecting biodiversity, nature and ecosystems have repeatedly failed to achieve their goals.
The acceleration in the loss of biodiversity and the deterioration of natural systems undermines the stability of our economic, social and political systems, says Oshadee Siyaguna, a thematic investing analyst at Regnan.
“We have a biodiversity crisis — but we also have a problem with how we’ve been approaching conservation,” says Siyaguna.
“The planet doesn’t care how it survives — but we care because we have to live on it. We want a stable natural system, a stable social system and a stable economic system.
“The fewer disruptions there are to business operations and socioeconomic conditions, the better and more predictable the outcomes. And that essentially should be the focus — to have all these systems operating within productive thresholds.”
Siyaguna says that while biodiversity is something all investors are starting to grapple with, it is of particular importance to universal investors like pension and sovereign wealth funds whose investment outcomes are dependent upon the health of the overall global economy.
He says investors considering biodiversity need to think of nature as a series of interconnected systems where everything interacts with everything else, and that humans have been modifying the environment for thousands of years.
Part of the problem investors face is that biodiversity is still emerging as an investment theme.
Siyaguna points to the increasing sophistication of climate change investing in recent decades, saying biodiversity will potentially go through the same curve — a feedback loop of articulating problems and triggering companies to search for solutions.
“The world’s biggest asset managers and asset owners are seriously looking at this but the approach is still embryonic.
“But these are just growing pains. We’ve been through this with climate change, we understand the playbook, it’s just a matter of how we progress it.”
The starting point is being able to articulate the problem properly, says Siyaguna.
“If you don’t understand the nature of the problem, then you’ll be addressing something that is completely different.
“A ‘let’s try to fix it quickly’ approach without really understanding the nature of the problem could have dire consequences.
“While this is an emergent theme in the investment industry, it is by no means a new issue — people have been wrestling with these issues for hundreds if not thousands of years. The very idea of conservation is more than 2500 years old.”
Oshadee Siyaguna’s paper Beyond Biodiversity sets out a framework for asset owners and managers to think about biodiversity and the stewardship of ecological and social systems.
Oshadee is a thematic analyst with Regnan. He is responsible for research, engagement and generating analysis and insights on ESG themes and issues.
Oshadee joined Regnan as an ESG analyst in 2015. Prior to that he was assistant vice president at PolitEcon Research.
Regnan is a responsible investment leader with a long and proud history of providing insight and advice to investors with an interest in long-term, broad-based or values-aligned performance.
Building on that expertise, in 2019 Regnan expanded into responsible investment funds management, backed by the considerable resources of Pendal Group.
Regnan Global Equity Impact Solutions Fund invests in mission-driven companies we believe are well placed to solve the world’s biggest problems, while the Regnan Credit Impact Trust (available in Australia only) invests in cash, fixed and floating rate securities where the proceeds create positive environmental and social change.
Both funds are distributed by Pendal in Australia.
For more information on these and other responsible investing strategies, contact Head of Regnan and Responsible Investment Distribution Jeremy Dean at firstname.lastname@example.org.
This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current at May 22, 2023.
PFSL is the responsible entity and issuer of units in the Pendal Focus Australian Share Fund (Fund) ARSN: 113 232 812. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund.
An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested.
This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation.
The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information.
Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance.
Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections.
For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website www.pendalgroup.com