#LCAW2022: Biodiversity – a natural concern

To celebrate London’s Climate Action Week, this article appears as part of IFA Magazine’s editorial campaign during the week, which aims to highlight key issues, news and views on climate change.

Written by Joe Yallop, Parmenion Investment Analyst

We depend entirely on the Earth’s ecosystems to provide the food, clean water, medicines and even oxygen we all need for a healthy society and economy. Without mangroves and coral reefs, coastal communities would have no natural protection from extreme weather conditions.

Yet when it comes to environmental issues, biodiversity is rarely mentioned – with the focus almost always being on climate change and global warming.

Biodiversity (“biodiversity”) refers to the diversity of life on earth, including all plant and animal species, the genetic diversity within and between those species, and the diversity of the ecosystems of which they are part. These ecosystems and their interactions are incredibly complex and have evolved over millions of years…

However, due to human activities, including unsustainable agriculture, deforestation, urbanization and pollution, many of the ecosystems are deteriorating, posing long-term risks to the sustainability of our economy. You can see the impact using the Planetary Boundaries framework developed by the Stockholm Resilience Centre(1).

This shows the safe operating limits for human activities. If we operate outside of these areas, we can cause long-term damage to the environment. As can be seen in the graphic below, we are already working out of bounds in several areas such as: B. Biosphere integrity, which relates to biodiversity loss, including the rate of species extinction each year.

The resources provided by these ecosystems are estimated at US$44 trillion, or more than half of global GDP(2). The sectors of the economy that are most dependent on nature are agriculture, food and construction – with a total value of around twice the German economy.

This is not insignificant and underscores the need for change to avoid irreversible damage to the natural capital that underpins our society and economy. As investors, considering environmental, social and governance (ESG) criteria can enable us to invest in companies that manage these risks effectively and offer solutions that lead us to a more sustainable economy.

We can also align our investments with UN Sustainable Development Goals 14 and 15 “Life Below Water” and “Life On Land”, both of which are linked to biodiversity. Through active leadership and engagement, we can encourage companies to better manage their businesses and supply chains.

There are more and more government policies and initiatives to support this process. The next UN Biodiversity Conference, COP 15, will be held in Canada (originally China) later this year. Similar to the COP 26 meeting on climate change in 2021, this is an opportunity to spread internationally
Agreement on measures to protect biological diversity.

The EU Biodiversity Strategy for 2030 is another long-term plan to protect our ecosystems, and the Taskforce on Nature-related Financial Disclosures is starting to set metrics for companies to report on their impact on biodiversity. These efforts can help governments create a framework for society to have a positive impact on biodiversity.

As with climate change, the importance of biodiversity should not be underestimated. The natural world supports our economy and provides most of our daily goods and services. As individuals and investors, we can all do our part to ensure we protect the nature we depend on for generations to come

“The services of nature are indispensable to make human life possible and worth living. We need all the bounty of our living planet to help us live healthy, happy lives long into the future.” – Sir David Attenborough

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