Implementing Sustainable Investment Strategies to Address Biodiversity Loss

Introduction

Asset managers need to implement specific engagement and investment strategies to stem the rapid deterioration in the biodiversity system and therefore curb its knock-on effect on the wider planet, society, and global economy, according to Chris Iggo, chair of the AXA Investment Managers (Axa IM) Investment Institute and chief investment officer of AXA IM Core.

The Importance of Biodiversity

Iggo emphasized that damaging the natural world would have “innumerable economic consequences.” He added that addressing biodiversity loss requires a genuine commitment from the asset management sector, which is not yet wholly evident.

Lack of Action in the Sector

A ShareAction report published in March this year revealed that only 23% of asset managers in Asia-Pacific have a biodiversity voting policy. Additionally, only two asset managers globally have filed resolutions on biodiversity in the past two years.

Axa IM’s Engagement on Biodiversity

Axa IM’s stewardship report highlights its engagement on biodiversity with companies in the food, packaging, and electric utilities sectors. This includes requesting zero-deforestation strategies and biodiversity loss mitigation strategies.

Utilizing Data for Sustainable Investment

The launch of the Taskforce for Nature-related Financial Disclosures (TNFD) in September will provide a comprehensive risk and disclosure framework for biodiversity. This will enable asset managers to identify businesses most exposed to biodiversity risks and their individual impact on the environment.

Asset managers should also use available metrics and tools to measure the impact of investments on the environment. Companies like Iceberg Data Lab offer assessment tools and data solutions that demonstrate the environmental impact of issuers and assets throughout their value chain.

Axa IM’s Biodiversity Fund

Axa IM partnered with Iceberg Data Lab to develop a biodiversity measurement tool for its biodiversity fund, which was launched in May last year. This tool enables investors to make detailed assessments of biodiversity-related risks and opportunities for more informed investment decisions.

Investing in Biodiversity Solutions

Despite the estimated US$133bn already invested annually in nature-based solutions, including US$18bn from private sector finance, this amount is only around a third of what is needed by 2030 to meet climate targets. Allocating capital to companies reducing their biodiversity footprints is one part of the solution, while investing in biodiversity-friendly solutions is another. The latter is particularly attractive to investors seeking to have a real impact on the environment.

Conclusion

To support a sustainable global economy, asset managers must prioritize implementing sustainable investment strategies to address biodiversity loss. This requires a commitment to engagement and using available metrics and tools to measure the impact of investments on the environment. By allocating capital to companies reducing their biodiversity footprints and investing in biodiversity-friendly solutions, asset managers can contribute to mitigating the risks posed by biodiversity loss and have a positive impact on the environment.

SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

SDG 15: Life on Land

The article highlights the need for asset managers to implement strategies to stem the rapid deterioration in the biodiversity system. This is directly connected to SDG 15, which focuses on protecting, restoring, and promoting sustainable use of terrestrial ecosystems, sustainably managing forests, combating desertification, and halting and reversing land degradation and biodiversity loss.

SDG 13: Climate Action

The article mentions the launch of the Taskforce for Nature-related Financial Disclosures (TNFD), which will help fill the gap in a comprehensive risk and disclosure framework for biodiversity. This is indirectly connected to SDG 13, which aims to take urgent action to combat climate change and its impacts.

SDG 12: Responsible Consumption and Production

The article emphasizes the need for asset managers to use available metrics and tools to measure the impact of investments on the environment. This aligns with SDG 12, which promotes sustainable consumption and production patterns.

SDG 9: Industry, Innovation, and Infrastructure

The article mentions the importance of upgrading infrastructure and adopting clean technologies and processes to make industries sustainable. This is related to SDG 9, which focuses on building resilient infrastructure, promoting inclusive and sustainable industrialization, and fostering innovation.

2. What specific targets under those SDGs can be identified based on the article’s content?

Target 15.5: Take urgent and significant action to reduce the degradation of natural habitats

The article highlights the need for asset managers to implement engagement and investment strategies to curb the rapid deterioration in the biodiversity system. This aligns with the target of reducing the degradation of natural habitats.

Target 13.3: Improve education, awareness-raising, and human and institutional capacity on climate change mitigation, adaptation, impact reduction, and early warning

The article mentions the launch of the Taskforce for Nature-related Financial Disclosures (TNFD), which aims to improve reporting from companies on their environmental footprints. This aligns with the target of improving education, awareness-raising, and capacity on climate change mitigation and adaptation.

Target 12.6: Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle

The article emphasizes the need for asset managers to use available metrics and tools to measure the impact of investments on the environment. This aligns with the target of encouraging companies to adopt sustainable practices and integrate sustainability information into their reporting cycle.

Target 9.4: Upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes

The article mentions the importance of upgrading infrastructure and adopting clean technologies and processes to make industries sustainable. This aligns with the target of upgrading infrastructure and retrofitting industries to increase resource-use efficiency and adopt environmentally sound technologies and processes.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

No specific indicators are mentioned or implied in the article that can be used to measure progress towards the identified targets.

SDGs, Targets, and Indicators

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Source: esgclarity.com

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