What should a biodiversity fund look like? It’s a question that’s going to attract increasing attention with the recent Taskforce for Nature-related Financial Disclosures hopefully opening the door to better data from companies on their impact on nature (or at the very least, nature’s impact on them).
The number of mutual and exchange-traded funds focused on biodiversity has grown significantly over the years, with 19 vehicles available in Europe by mid-2023, according to Morningstar Direct, while assets under management in such funds tripled to nearly $1trn in 2022, and rose again to around $1.4trn by June 2023.
However, with a lack of consensus around best practice, as well as little regulatory oversight, it can be hard to determine what a good biodiversity fund looks like.
“Methodologies and metrics are still nascent and are inconsistently applied, and analysis to date often meshes together assessments of nature-related financial risk with those of impacts, muddying the topic for investors seeking to build nature-positive portfolios,” according to a recent Sustainable Fitch report, Biodiversity in ESG: Investor Focus on Impact Grows.