By Mélissa Bourassi, Sustainability Analyst, Allianz Global Investors
Part one of COP15 ended with optimism that biodiversity can be put on a path to recovery by 2030. It has never been more important for investors to play a role in protecting and promoting the world’s natural capital.
Biodiversity is falling fast, with little action being taken yet to tackle the crisis
It’s not too late, though, and there is a good chance of political consensus for action
Investors can play their part by integrating biodiversity factors into their investment processes and backing innovators
While the 2021 United Nations Climate Change Conference, known as COP26 , needs no introduction, its “biodiversity” equivalent is less known. Yet the UN Biodiversity Conference (COP 15) that began in October 2021 is equally important and is primed to set new goals for conserving and protecting the world’s natural capital. At last, the biodiversity crisis is moving out of the shadow of climate change with which it is interlinked.
The timing is not a moment too soon, as the pressure on our ecosystems is increasing exponentially. Can we imagine our Earth without biodiversity? Indeed, what will happen if we continue to underestimate all that nature provides us with?
We believe that climate change and biodiversity loss should be tackled together, and that sustainable finance can help to tackle both. They both classify as “planetary boundaries” – the nine boundaries that humanity must respect and protect to maintain life on Earth. Investors have an opportunity to participate in the transition towards not just a zero-carbon economy but also a nature-positive system.
Biodiversity in crisis
The natural world is in unprecedented decline. More than one million species are under threat, plastic pollution threatens about 66% of the marine environment and plant species have declined by about 50%. Humans are mostly to blame, as we change land and sea use, exploit organisms through activities such as fishing, pollute widely, introduce invasive alien species, and emit greenhouse gases.
To put it simply, we are consuming Earth’s resources faster than it can replenish them. The good news, though, is that there is still time to reverse the trend for future generations.
There are reasons for hope. Importantly, a coordinated policy response is expected from COP15, where the draft of the post-2020 global biodiversity framework should be adopted. Further, the Taskforce on Nature-related Financial Disclosures (TNFD) was launched in June 2021 to establish an international reporting framework that will allow investors to understand nature-related risks, impacts and opportunities, aiming to repeat the earlier success of the Taskforce on Climate-related Financial Disclosures.
Aligning biodiversity and climate ambitions through investment
Alongside these initiatives, investors can act as agents of change. Indeed, there are strong financial reasons for integrating biodiversity factors into the investment process, alongside climate change, as risks associated with degradation of nature can directly reduce returns. Engaging with companies helps to ensure that they formalise commitments to protecting biodiversity and apply them across their operations. In case of severe controversy or failed engagement, as defined by the United Nations Global Compact (UNGC) framework, exclusion of companies from an investment portfolio can be considered.
Responsible investors can require more disclosure from companies about their impact on natural resources, so raising their awareness of the obligation to protect delicate ecosystems. As planetary boundaries are one of our core sustainability themes, Allianz Global Investors is committed to increasing engagement on biodiversity, especially requesting greater data availability.
Beyond engagement, investors have opportunities to support innovation in fields such as carbon sequestration, the circular economy or regenerative agriculture. The UN Convention on Biological Diversity, in the new global biodiversity framework being considered at COP15, highlights the need for finance, stating: “adequate financial resources to implement the framework are available and deployed, progressively closing the financing gap up to at least US $700 billion per year by 2030.”
Urgent rallying cry
While COP26 is rightly regarded as a critical moment for policymakers to turn their words on the climate crisis into action, the same is true of COP15 for biodiversity. Awareness of our ecosystem’s steep decline is growing. As scientists have warned for many years, the challenges of climate change and biodiversity are interlinked. Both represent threats to the wellbeing of human society that must be tackled urgently. As investors everywhere consider the question of how to invest sustainably, analysis, data and engagement around climate and biodiversity will be essential to the answer.
Find the original article on Allianz GI's website
The 26th session of the Conference of the Parties (COP 26)
The UN Convention on Biological Diversity (CBD) released in July 2021 the draft of the post-2020 framework that will be adopted in the 2nd part of the COP 15, to define targets and pathways to preserve and protect nature and its essential services for the next decade and beyond.
 Biodiversity is considered in principles 7, 8 and 9 of the UNGC.
Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security.
The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted.
This material has not been reviewed by any regulatory authorities. In mainland China, it is used only as supporting material to the offshore investment products offered by commercial banks under the Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations. This document does not constitute a public offer by virtue of Act Number 26.831 of the Argentine Republic and General Resolution No. 622/2013 of the NSC. This communication's sole purpose is to inform and does not under any circumstance constitute promotion or publicity of Allianz Global Investors products and/or services in Colombia or to Colombian residents pursuant to part 4 of Decree 2555 of 2010. This communication does not in any way aim to directly or indirectly initiate the purchase of a product or the provision of a service offered by Allianz Global Investors. Via reception of his document, each resident in Colombia acknowledges and accepts to have contacted Allianz Global Investors via their own initiative and that the communication under no circumstances does not arise from any promotional or marketing activities carried out by Allianz Global Investors. Colombian residents accept that accessing any type of social network page of Allianz Global Investors is done under their own responsibility and initiative and are aware that they may access specific information on the products and services of Allianz Global Investors. This communication is strictly private and confidential and may not be reproduced. This communication does not constitute a public offer of securities in Colombia pursuant to the public offer regulation set forth in Decree 2555 of 2010. This communication and the information provided herein should not be considered a solicitation or an offer by Allianz Global Investors or its affiliates to provide any financial products in Brazil, Panama, Peru, and Uruguay. In Australia, this material is presented by Allianz Global Investors Asia Pacific Limited (“AllianzGI AP”) and is intended for the use of investment consultants and other institutional/professional investors only, and is not directed to the public or individual retail investors. AllianzGI AP is not licensed to provide financial services to retail clients in Australia. AllianzGI AP (Australian Registered Body Number 160 464 200) is exempt from the requirement to hold an Australian Foreign Financial Service License under the Corporations Act 2001 (Cth) pursuant to ASIC Class Order (CO 03/1103) with respect to the provision of financial services to wholesale clients only. AllianzGI AP is licensed and regulated by Hong Kong Securities and Futures Commission under Hong Kong laws, which differ from Australian laws.
This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors U.S. LLC, an investment adviser registered with the U.S. Securities and Exchange Commission; Allianz Global Investors Distributors LLC, distributor registered with FINRA, is affiliated with Allianz Global Investors U.S. LLC; Allianz Global Investors GmbH, an investment company in Germany, authorized by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin); Allianz Global Investors (Schweiz) AG; Allianz Global Investors Asia Pacific Ltd., licensed by the Hong Kong Securities and Futures Commission; Allianz Global Investors Singapore Ltd., regulated by the Monetary Authority of Singapore [Company Registration No. 199907169Z]; Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial Instruments Business Operator [Registered No. The Director of Kanto Local Finance Bureau (Financial Instruments Business Operator), No. 424, Member of Japan Investment Advisers Association and Investment Trust Association, Japan]; and Allianz Global Investors Taiwan Ltd., licensed by Financial Supervisory Commission in Taiwan.