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Corporate 02.12.2021

UBP sheds light on the biodiversity-investment nexus

UBP sheds light on the biodiversity-investment nexus

As part of Building Bridges Week – the agenda-setting event on sustainable finance taking place in Geneva from 29 November to 2 December 2021 – UBP hosted an interactive panel discussion on biodiversity and its investment opportunities.


Bringing together a diverse group of speakers from the finance, conservation and business communities, the session gave clear, practical insights into the state of the biodiversity crisis and made a strong case for the role of the financial sector in protecting and restoring biodiversity.

The loss of biodiversity is more than an environmental crisis, explained Victoria Leggett, UBP’s Head of Impact Investing, since the global economy is highly dependent on nature and its services, such as water purification and pollination.

However, nature is in severe crisis, warned Colin Porteous, Chief Investment Officer at the southern African conservation organisation, Peace Parks Foundation, quoting a report from the World Wide Fund for Nature (WWF) and the Zoological Society of London, which found that the overuse of biocapacity currently stands at 56% globally, meaning that worldwide consumption is exceeding the planet’s ability to regenerate.

Investment opportunities are proliferating

The panellists sent a strong message about the need to make finance part of the solution to tackling the biodiversity crisis.

“We still need to bring power of the finance community to come and work more closely with the conservation world,” said Gerard Bos, Director of the Global Business and Biodiversity Programme at the International Union for Conservation of Nature (IUCN).

Reforming the food system came out as a priority in the discussion, as this offers significant investment opportunities alongside benefits for nature, the climate, farmers and global food security.

In its current form, the agri-food sector is not sustainable. Food production uses half of the world’s habitable land while being responsible for two-thirds of global water consumption and one-fifth of global emissions. 

Many solutions to transform the sector are already available, such as precision agriculture, alternative protein sources, innovation to reduce food waste and an increased focus on regenerative agriculture. Investing in these sorts of solutions can offer attractive returns, as legislation and consumer pressure will make current practices less viable.

Moving ahead of regulation

While awareness of the biodiversity crisis is still trailing behind the climate agenda, the panellists were united in their call for companies to start taking action now and not use the lack of regulation on biodiversity as an excuse for inaction.

Typically, corporate innovation meets regulatory change, but innovation can also come in anticipation of regulation, Victoria Leggett stressed, adding that, “the opportunity sets around biodiversity in the investable world increased dramatically.”

The panellists were united in their view that regulation is fast approaching, pointing to the Task Force on Nature-related Financial Disclosures (TNFD) which is in the process of developing a common reporting framework for nature-related risks, as well as the European Central Bank’s recommendation to price in climate and biodiversity risks. 

“Frontrunner businesses are not waiting until the legislation is there […] but they are looking for innovative approaches on how to measure biodiversity,” Johan Lammerant, Lead Expert Natural Capital and Biodiversity for Arcadis, said, calling on corporates to, “take action today” rather than waiting for the perfect approach.

Creating biodiversity markets

The widespread use of metrics to measure biodiversity is key, highlighted Colin Porteous, explaining that it will allow value to be progressively placed on nature and create biodiversity markets, which will help channel capital into protection and restoration.

“We are in crisis, but there is a great opportunity to find alpha in the market. It comes down to risk and how the risk is priced,” Porteous concluded in his closing remarks. 

“Nature-positive should be a quality trademark of a company,” added Johan Lammerant, making a strong case for aligning business models with a nature-positive pathway.

Although biodiversity is often perceived to be a more complex challenge than climate change, especially as there is no one single indicator to measure biodiversity compared to carbon emissions, there are many characteristics that should allow for faster progress on biodiversity.

Contrary to the climate crisis, which deals with an invisible gas, biodiversity is more tangible and can mostly be tracked with current technology, while the benefits of protection and restoration are also local as well as global, reducing concerns about any individual impact being rendered futile by a lack of action elsewhere.

Engaging instead of punishing

The question of divesting from companies with poor environmental records emerged as a controversial issue in the debate. While some environmental activists ask for broader exclusions by banks, many experts warn that such an approach may be counterproductive and should be reserved for the most controversial business areas.

Johan Lammerant explained that financial institutions should try to engage as much as possible with companies, such as fossil fuel producers, as they must be part of the transformation and will otherwise just be left to other banks with less stringent exclusion criteria.

From climate-neutral to nature-positive

UBP’s panel discussion was a valuable contribution to the Building Bridges programme. While the climate crisis still largely dominates sustainable finance debates, the opening summit of Building Bridges pointed to the need to broaden the discussion to include other environmental concerns and acknowledged the opportunities of investing in nature-positive solutions.

INVESTING IN BIODIVERSITY

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