#LCAW2022: Biodiversity – a natural concern

by | Jun 29, 2022

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Celebrating London Climate Action Week, this article features as part of IFA Magazine’s editorial campaign throughout this week, which aims to highlight key issues, news and views in the field of climate action.

Written by Joe Yallop, Parmenion Investment Analyst

We depend entirely on the earth’s ecosystems to provide the food, clean water, medicines and even oxygen that we all need for a healthy society and economy. Without mangroves and coral reefs, coastal communities would have no natural protection from extreme weather.

Yet when it comes to conversations about the environment, biodiversity is rarely mentioned – with the focus almost always on climate change and global warming.

Biodiversity (‘biological diversity’) relates to the variety of life on earth, including all species of plants and animals, the genetic diversity within and between these species, and the variety of ecosystems they are part of. These ecosystems and their interactions are incredibly complex, having developed through evolution over millions of years…

However, due to human activity including unsustainable agriculture, deforestation, urbanisation and pollution, many of the ecosystems are in decline, presenting long-term risks to our economy’s sustainability. You can see the impact through the ‘Planetary Boundaries’ framework developed by the Stockholm Resilience Centre(1).

This shows the safe operating limits for human activity. When we operate outside of these, we can cause long-term damage to the environment. As seen in the chart below, we’re already operating outside of the boundary for several areas, such as Biosphere Integrity, relating to biodiversity loss including the rate of extinction of species each year.

The resources provided by these ecosystems are estimated to be worth $44 trillion, or more than half of the world’s GDP(2). The economic sectors relying most on nature are agriculture, food and beverages, and construction – with a combined value of roughly double the German economy.

That’s not insignificant, and highlights the need for change to avoid causing irreversible damage to the natural capital underpinning our society and economy. As investors, a consideration of environmental, social and governance (ESG) criteria can allow us to invest in companies managing these risks effectively, and provide solutions that transition us to a more sustainable economy.

We can also align our investments with the UN Sustainable Development Goals 14 and 15, ‘Life Below Water’ and ‘Life on Land’, both linked to biodiversity. Through active stewardship and engagement, we can encourage companies to better manage their businesses and supply chains.

There are more and more government policies and initiatives to support this process. The next UN Biodiversity Conference, COP 15, is taking place in Canada (originally China) later this year. Similar to the COP 26 gathering on climate change in 2021, this is an opportunity to get widespread international
agreement on policies to protect biodiversity.

The EU’s Biodiversity Strategy for 2030 is another longterm plan to protect our ecosystems, and the Taskforce on Nature-related Financial Disclosures is beginning to establish metrics for companies to report on biodiversity impacts. These endeavours can help governments create a framework for society to have a positive impact on biodiversity.

As with climate change, the importance of biodiversity cannot be underestimated. The natural world underpins our economy and provides the majority of our daily goods and services. As individuals and investors, we can all do our bit to make sure we protect the nature we depend on for generations to
come.

“The benefits provided by nature are indispensable for making human life both possible and worth living. We need all the riches of our living planet to help us live healthy happy lives long into the future.” – Sir David Attenborough

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