Biodiversity investment and the reality of the significant funding gap needed to reach climate goals lies at the centre of many of the on-going conversations on mitigating climate change and taking environmental action.
The outcome of the late 2022 COP15 UN Biodiversity Conference was The Kunning-Montreal Global Biodiversity Framework (GBF) outlining global targets for biodiversity. Not only were targets outlined, but assessing frameworks for securing investment and measuring the impact of that biodiversity investment were also a topic of priority.
One of the goals of the GBF is to “mobilise by 2030 at least $200 billion per year in domestic and international biodiversity-related funding from all sources – public and private.†So, with that in mind, who is leading the charge and what are the challenges and opportunities to biodiversity investment from the perspective of the private sector?
In this article, we explore an insightful interview with two leaders from the specialist asset management group, Impax Asset Investment, from the 2023 Biodiversity Impact Report by Environmental Finance, which covers:
- The importance of biodiversity investment from private sources
- The challenges facing businesses investing in biodiversity
- How we can identify the most impact biodiversity investments
- How policy is supporting the effort to grow private funding for biodiversity
Biodiversity investment is top of mind but not without its challenges
Recognising the importance of nature for the global economy at large, the value of biodiversity investment from the private sector is becoming more widely known. Impax Asset Management has been incorporating biodiversity and nature-related investments into their business strategy for years.
However, while understanding the importance of investing in biodiversity, Chris Dodwell, Head of Policy and Advocacy at Impax, also recognises the significant challenges.
“Nature and its processes are in large measure silent and invisible. This makes it hard to assess how dependent our economic prosperity is on nature’s services, as well as how to trace our impacts on the natural world.â€
So how is Impax combating these challenges and successfully integrating biodiversity and nature into its investment strategies for its clients?
“The whole discipline of biodiversity risk analysis is quite new and data or metrics are still very scarce,†says Lisa Beauvilain, Global Head of Sustainability and Stewardship. “If it has been determined that biodiversity is a material risk to a company, we’ll look at whether the company has processes in place to analyse exposures to biodiversity hotspots, for example, and whether there are processes in place to manage and mitigate these exposures.â€
By looking at the risks a business may face in the future by not investing back into nature, an effective biodiversity investment plan can be developed that supports local biodiversity habitats, helps to reach global and national biodiversity targets, and also ensures long-term business success.
Identifying the most impactful biodiversity investment solutions
It’s becoming increasingly clear that climate change cannot be adequately mitigated without tackling the biodiversity crisis. This is something that Impax has factored into its biodiversity investment philosophy which focuses on five key areas when it comes to the environment (as identified by the Intergovernmental Science-Policy Platform on Biodiversity andEcosystem Services):
- Land-use change investment such as food waste reduction, resource efficiency and circularity and deforestation
- Reducing the overexploitation of organisms by investing in sustainable aquaculture, for example
- Investment into climate change mitigators such as renewable energy and water treatment
- Investment in pollution reduction such as reducing plastic pollution
- Investment in solving the issue of invasive non-native species like the zebra mussel, for example
“We are acutely aware that almost all the investible solutions identified to date focus on reducing pressure on biodiversity. While this is a crucial first step, there are comparatively few examples where we can commercially invest in the restoration of nature,â€says Dodwell.
“So we’re working… to find case studies where companies are investing in activities that restore nature in order to reduce risks and generate commercial benefits…While it is difficult to find cases where biodiversity is the main investment driver, investing in things like climate mitigation and clean water often have substantial benefits to the preservation of natural biodiversity…
“By shining a light on these examples, we hope to identify actions which industry and governments can take to facilitate nature-positive investments.â€
How policy is supporting biodiversity investment
While there is a significant way to go in implementing the robust and universal frameworks needed to support biodiversity investment and accurately measure its impact on nature, Impax highlights five key areas, as discussed at COP15, that are helping to achieve progress.
- Meaningful targets
By adopting clear, universal targets that help everyone to align on goals of biodiversity investment allows for clear communication of how investments can be made and where.
- Clear frameworks
A clear way to translate these aforementioned targets into meaningful policy action which can then help the private sector identify funding gaps and create biodiversity investment strategies.
- Business requirements
Making explicit the requirements for companies and financial institutions to disclose their impacts and dependencies on nature will help hold businesses accountable and also allow them to identify internally beneficial opportunities for biodiversity investment.
- Finance gap acknowledgement
Recognition of the need to align financial flows – both public and private – with the goals of the GBF which puts the actions of both development banks and private investors in the spotlight.
- Reversal of unhelpful subsidies
Lastly, a call for the reform and redirection of environmentally harmful subsidies.
“We are very pleased to see progress on all of the above in the Kunming-Montreal Global Biodiversity Framework,†says Beauvilain. “[And] although we welcome COP15 as a starting point, there is much work to be done in both implementing the framework and addressing important gaps in our approach to tackling this crucial challenge.â€
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