According to the Financial Times, geopolitical ructions over a new global fund proposed for nature conservation have stymied an agreement at the UN global biodiversity summit in Montreal but the COP15 event has attracted a new cohort: investors.
Unlike its more mature cousin, the UN COP27 climate summit held in Egypt last month, the Conference of Parties to the UN Convention on Biological Diversity has not typically attracted fund managers and business leaders. But the rising capital value of the natural world as climate change forces action across government and industry, as well as an increasing understanding of the rising risks to their companies from a decline in natural resources, have brought a broader audience to the gathering in Canada.
Adam Kanzer, head of stewardship for BNP Paribas Asset Management in the US, said the strong level of interest from investors was “new”. “Very few investors, very few companies” were previously talking about biodiversity, he said. “It’s difficult to talk about the significance of this issue without sounding like a crazy person, like the guy on the street holding up a sign saying the end of the world is nigh — and you tend to tune those people out. But the data is really terrifying.”
Several investors said it was their first time attending a biodiversity COP. “I think that holds true for the vast majority of investors I’ve met here,” said Peter van der Werf, of Dutch asset manager Robeco, speaking from Montreal, where the summit was moved from China because of Covid-19.
The World Economic Forum estimated in a 2020 report that more than half of global GDP, or about $44tn, was “moderately or highly dependent on nature”. Construction, agriculture and food and drinks are the sectors most dependent on nature, the WEF report highlighted.
The UN scientific body on nature, known as the Intergovernmental Platform on Biodiversity and Ecosystem Services, found in its landmark 2019 assessment that 1mn animal and plant species were in danger of extinction. It also estimated that about three-quarters of food crops that depend on animal pollination were at risk.
“It’s not just a horrendous thing that is happening to the environment, but this is a financial risk,” said Kanzer. “As fiduciaries, I feel we have an obligation to pay attention to it.”
Negotiators in Montreal are trying to thrash out what is dubbed a “Paris Agreement for nature”, consisting of a series of national commitments to reverse the damage by humans to the natural world. The talks ran into trouble midweek after an African group of 54 countries, several South American and Latin American countries, plus India and Indonesia, walked out over the failure of wealthy countries to provide finance for the conservation of nature. Negotiations were restarted as more than 100 environment ministers arrived in Montreal by the end of the week.
Japan, the EU, Norway, Switzerland and France are reportedly among those countries opposed to a new fund. The COP15 talks are scheduled to conclude by Monday but are widely expected to run into overtime because of the divide between nations.
China’s president, Xi Jinping, whose country holds the presidency this year, urged countries to work together to promote “harmonious coexistence between man and nature”, in an address by video link on Thursday.
A new framework would replace the so-called Aichi biodiversity targets, first set in 2010 and named after Japan’s Aichi prefecture. None of those targets have been fully met yet.
One important item on the Montreal agenda is whether to ask businesses to assess and report their dependence on biodiversity — a proposal that would likely be implemented by the Task Force on Nature-related Financial Disclosures.
Robeco’s Van der Werf said disclosure from companies was “critical” for investors who were looking to invest in sustainable production and reduce exposure to deforestation, among other things.
Companies surveyed by non-profit group CDP, which operates a voluntary disclosure system used by investors, were responsive to new high-level questions on biodiversity placed in a recent survey, said Sue Armstrong-Brown, the global director for environmental standards.
About 7,700 companies out of more than 8,800 in the survey gave details. “A huge majority of companies responded with no fanfare,” said Armstrong-Brown. “And the numbers who talked about biodiversity were much higher than the numbers who were actually taking action towards targets. So that’s the next step.”
In a recent report, Goldman Sachs said investing in nature could mean finding companies that directly contribute to conservation efforts, or by investing in companies that reduce or manage their biodiversity risk.
Mary Beth Gallagher, director of engagement for Domini Impact Investments, said many businesses would need to “transform” away from “a lot of the goods, the practices that we have . . . so we’re consuming fewer raw materials and extracting less.” “If we degrade the ecosystems that we depend on for food and water and air filtration, then that ultimately affects our business. This has relevance across the entire economy.”
