Biodiversity has historically failed to garner the same attention as climate change, although there are signs that it is beginning to rise up the policy agenda, especially on the heels of COP15, the centrepiece of which was the Kunming-Montreal Global Biodiversity Framework and its so-called ‘30×30’ target to protect 30% of nature by 2030.
Against this backdrop, ESG Clarity Asia sat down with BNP Paribas Asset Management’s biodiversity lead, Robert-Alexandre Poujade (pictured left) to discuss the growing momentum around biodiversity, his views on COP15, the latest developments around the Taskforce on Nature-related Financial Disclosures (TNFD) and why so few biodiversity funds have been launched so far.
Why has biodiversity moved up the policy agenda over the past few years?
In the past two or three years, we’ve seen momentum growing with a lot of interest from investors in the topic. The reasons are multiple. There is the risk assessment, and then there have been many reports from NGOs, the World Economic Forum, the World Bank and the Paulson Institute saying that biodiversity loss is a risk for financial stability.
At the beginning there had been this COP21 effect in 2015 [where the Paris Agreement was put in place], where for most of the industry, climate has been the entry point for environmental topics. But then as we moved along in understanding the issues, we have seen that climate and biodiversity paths are interlinked. We cannot address one without the other.
Another reason why this is such a hot topic is the regulatory side. There is this article 29 of the French energy climate law. This is requiring all French asset managers to disclose their biodiversity footprint. This is what’s happening in France, anticipating what the TNFD could bring in in all countries.
Why are investors in particular showing more of an interest in biodiversity strategies?
Education has been a key theme. An important development was the landmark report from IPBES [Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services] in 2019, which showed that one million species were at risk of extinction. This was one of the major publications from scientists to detail the scale of biodiversity loss. This has trickled down into investors’ minds.
Historically, it has been difficult for investors because of the complexity of the topic. With carbon, it’s a little bit easier to address the topic from an investor’s perspective. What you want to do is minimise your C02 content in your fund. So basically when you invest in companies, you want to target renewables and less energy or CO2 intensive companies.
But in order to be good on biodiversity, you cannot apply this type of thinking because there are trade-offs to make. It’s not always black and white. You have to understand all the ramifications, the granularities and since biodiversity has to be taken at a local context, you cannot apply this top-down approach to minimise everything. This complexity requires internal resources in financial institutions.
Did COP15 and its ‘30×30’ target go far enough in addressing biodiversity loss?
The trajectory is very clear: more protection, more conservation, more money going for conservation. So that’s very good. There was a lot of presence from the corporate world and the investor world at this government event. It is a global framework for countries, but for it to be successful such frameworks and such agreements should be private and public led.
Regardless of this agreement, the train has already started and cannot be stopped. We published our biodiversity strategy in 2021. Even without COP15, we would continue to try to make progress. Obviously it’s helpful to have this agreement, but I mean there is so much momentum that I believe that this is a very good moment for the uptake of biodiversity in the financial industry.
What is the latest with TNFD and your view on how that is evolving?
In the last versions, there has been more integration of, for example, indigenous people’s rights. The social aspect is a little bit more present. It has been put back in the recommendations. The recommendations now I think are also stronger, for example previously in the wording, you didn’t see the double materiality topic. You could just read the recommendations and think that double materiality was not applied, whereas that is no longer the case.
The cornerstone part to me is this LEAP process that companies should apply when looking at the TNFD recommendations. LEAP stands for locate, evaluate, assess and prepare. And this locate part goes back to what I was saying: biodiversity is local and you need to locate. If you are a company in the agrifood chain, of course you need to locate the upstream products you are sourcing: the farms, the plantations.
Why have there been so few biodiversity funds that have launched so far?
The reason goes back to what I was saying before on education and data. In order to launch a fund, you need to have a portfolio manager who is educated enough to invest in the good biodiversity companies.
We have launched an ecosystem restoration strategy one year ago, which is a listed equity strategy. We also launched a biodiversity ETF, which is more a best-in-class approach, relying on the data provider on biodiversity we have called Iceberg Data.
We selected this data provider two years ago when we launched a big RFP. A few years ago we didn’t have any data provider on biodiversity so we forced the market to come to us with a good proposal and Iceberg Data Lab won the RFP. Since that time, we now have access to a so-called corporate biodiversity footprint, which is basically an impact metric on any given company and thanks to that metric we have calculated our biodiversity footprint.
