Invest in Biodiversity February 25, 2022

Invest in Biodiversity

World Wildlife Day will be celebrated on 3 March 2022. This year’s theme is “Recovering key species for ecosystem restoration”.1

The aim of this year’s event is to draw attention to the conservation status of some of the most critically endangered species of wild fauna and flora, and to drive discussions towards imagining and implementing solutions to conserve them.

The aim of the event is also tied to the achievement of the UN’s Sustainable Development Goals (SDGs), specifically 14: Life Below Water and 15: Life on Land, but with close linkage to other SDGs like No Poverty; Zero Hunger; Ensure Sustainable Consumption and Production Patterns; Climate Action2.

So, in 2022, World Wildlife Day will drive the debate towards the imperative need to reverse the fate of the most critically endangered species, to support the restoration of their habitats and ecosystems and to promote their sustainable use by humanity.

According to the latest data from the International Union for Conservation of Nature Red List of Threatened Species, over 8,400 species of wild fauna and flora are critically endangered, while close to 30,000 more are understood to be endangered or vulnerable. Based on these estimates, over a million species are threatened with extinction.

Continued loss of species, habitats and ecosystems threatens all life on Earth as people everywhere rely on wildlife and biodiversity-based resources to meet all their needs, from food and fuel to medicines, housing, and clothing. Furthermore, millions of people also rely on nature as the source of their livelihoods and economic opportunities.

But, when it comes to investing and business, biodiversity protection has long been undervalued compared to the fight against climate change and pollution.3

According to Edition 5 of the Stewardship Matters magazine, business would simply not exist without biodiversity, and yet the dependence of business on it has been largely obscured or remained too complex for most businesses to comprehend.

Investors need to build upon climate risk capabilities and realise the impacts and dependencies of their supply chains on nature.

For example, our food systems depend upon pollinators, which in turn depend upon access to native vegetation. So, investing in an agribusiness that sets ESG targets and integrates nature-protecting systems over and above good business governance is clearly a better bet.

Businesses which understand biodiversity risks, responsibilities and opportunities can start to direct investments that build resilience and productivity while stewarding the natural environment. They unlock potential revenue streams from emerging ecosystem markets that offer solutions to carbon capture, biodiversity restoration and clean water.

However, there are some key challenges when considering biodiversity from an investment perspective, one of which is measurement.

Unlike climate risks, where the market has coalesced around carbon emissions as the metric, there is currently no obvious unifying equivalent for biodiversity. Furthermore, investors still lack consistent and transparent data from companies, which would enable them to truly incorporate biodiversity into their decisions. But things are looking up, as the Taskforce for Nature-related Financial Disclosures (TNFD) will be releasing a draft risk management and disclosure framework in early 2022 for organisations to test its use in reporting and acting on evolving nature-related risks. The TNFD intends to deliver a framework that helps financial institutions and companies attain better information that incorporates nature-related risks and opportunities into their strategic planning, risk management and asset allocation decisions.

The UN Convention on Biological Diversity (CBD) earlier developed the draft Post-2020 Global Biodiversity Framework that promises a Paris-style agreement for UN-parties. It builds on a strategic plan for biodiversity with 21 targets for 2030. Effective implementation means mobilising resources from public and private finance sectors and multi-sectoral cooperation. Goals of Singapore’s National Biodiversity Strategy and Action Plan mirror the objectives of the CBD. It is developed by the National Parks Board and supports the City in Nature vision, one of the key pillars of the SG Green Plan 2030.

To conclude, here are a few points to consider when looking at biodiversity and sustainable investing4:

  • Biodiversity is an important theme in sustainable finance because of its value. The OECD estimates that ecosystem services are worth USD125 trillion-140 trillion per annum to society, equivalent to ~1.5x global GDP.
  • The risks that investors are exposed to through biodiversity loss in their portfolio come from two main categories: physical and transition risks. Industries such as tourism, agriculture, forest and fisheries are more exposed to physical risk resulting from biodiversity loss. And transition risks impact industries such as logging, mining, intensive livestock farming, infrastructure, transport and plastics. These sectors are also exposed to reputational, regulatory or litigation risks.
  • Companies with biodiversity-friendly businesses provide innovative solutions, and offer compelling investment opportunities.
  • Some of the themes you can invest in are: ecosystem protection, future energy, resource efficiency and smart mobility.

With hopes to set goals for mid-century and 2030 at the upcoming continuation of COP15 in Kunming (15th Conference of the Parties to the CBD), and the pledge to end deforestation by 2030 at COP26, the significance of biodiversity has begun to grab more worldwide attention. Hopefully, investors in 2022 will take more action to ensure that their investments also have a beneficial impact on the planet.

ESG-related exposure

A good place to start ESG investing is to look for ESG-focused Funds or ETFs such as the ones below. We do note that positive change can really be made through investments ESG funds with nature-positive and NetZero objectives. To check them out, go to:

Ticker AUM Average Vol(3mths) Expense Ratio Dividend Yield 3 Year return
ESGU.US USD 25.49B 1.12M 0.15% 1.06% 124.3%
SUSA.US USD4.33B 287K 0.25% 1.09% 93.2%
ESGV.US USD6.35B 317K 0.09% 1.09% 88.9%

Investors can also get ESG exposure through investment in companies with high ESG scores as the ones below. Scores indicate ESG risk exposure of the company and may not reflect nature-positive actions of the companies. Companies that adopt TNFD and TCFD frameworks are the ones to watch.

Ticker ESG score9 Market Cap Industry 3 Year return
MSFT.US 76.30 2,300B Infrastructure software 190.6%
CAN.US 75.95 225B IT Services 134.9%
CRM.US 72.92 230B Application software 53.7%

ESG-related unit trusts are available on the POEMS website. To check them out go to:

Schroder ISF Global Sustainable Growth Fd F Acc SGD
BlackRock Sustainable Energy Fund A2 SGD H (LU1978683503)
Schroder ISF Glb Climate Change Equity Fd A Acc SGD
AB SICAV I – Sustainable Glb Thematic Portfolio Class A SGD
UOB United Sustainable Credit Income Fd CL A SGD Acc H
Fidelity Sustainable Asia Equity Fd A SGD
Stewart Investors Worldwide Leaders Sustainability Fund
Fidelity Sustainable Asia Equity Fd SR-ACC-SGD

This article was written in consultation with Phillip Capital Management ESG.



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