The United Nations’ World Environment Day on 5 June focuses on biodiversity and the concern about its integrity and its importance for global communities and life on Earth generally as well as markets and economies.
World Environment Day is one of the longest-established focal points for environmental action. Since 1974, governments, businesses, organisations and individuals use the occasion to renew their efforts on a pressing issue. In 2020, that issue is biodiversity.
Human beings evolved during the most biologically diverse period in Earth’s history. Biodiversity is the foundation that supports all land and water-based life. It affects every aspect of human health, providing clean air and water, nutritious foods, scientific understanding and medicine sources, natural disease resistance, and climate change mitigation.
We rely on these ecosystem services. For example, 75% of worldwide crops of fruit or seeds depend, at least in part, on pollinators. Improving pollinator density and diversity boosts yields – pollinators affect 35% of global agricultural land, supporting 87 of the leading food crops worldwide.
If there is a common understanding among new and experienced investors, it is that diversification can help mitigate risk. A broadly diversified portfolio is less volatile and more resilient than one that focuses on a particular issuer or sector.
On a vastly more complex scale, biodiversity plays a similar role in natural ecosystems. Biodiversity is resilience. Paradoxically, it is also fragile. As one recent study put it, “extinction breeds extinctions” as close dependencies between species on the brink of extinction mean that changing or removing one element of this web affects the entire life system with irreversible, adverse consequences.
We are now in the middle of the Earth’s sixth mass extinction. This one is unique, however. Human activity is driving it, including:
Source: World Wildlife Fund (WWF)
We have reached the point where it would take 1.6 Earths to meet the demands that we make of nature each year. If nothing is done, biodiversity loss will have severe implications, including the collapse of food, health and economic systems.
The emergence of COVID-19 underscores that when we defile biodiversity, we destroy the system that supports human life. Today, about 75% of all emerging infectious diseases in humans are estimated to be zoonotic, i.e. transmitted to people by animals. Land-use conversions and the wildlife trade are key suspects.
Biodiversity is the natural capital resource we draw upon in most human activities, so the implications of its accelerating loss should be front-of-mind for investors. If we allow this to proceed on its current course, we will encounter a world human beings have never experienced before.
The value destruction that is underway is unprecedented. All global ecosystem services are estimated to be worth USD 125 trillion per year, equivalent to almost twice the world’s total gross domestic product.
Although many industries engage in activities that depend upon these services, or affect them, corporate policies and practices to address biodiversity are relatively new.
At BNP Paribas Asset Management, we are working to raise awareness among institutional investors and companies of the critical importance of preserving biodiversity. The good news is that it is not too late to reverse course, but we must take action now if we wish to maintain current levels of prosperity and extend the benefits to the developing world.
Our focus is on delivering long-term, sustainable investment returns by:
Here are a few recent steps we have taken to address the biodiversity crisis:
By allocating capital to strategies that integrate sustainability factors or that promote positive change. In this way, investors can target attractive financial returns while helping to safeguard the world’s natural capital – its biodiversity. Such actions support not only the environment, but also human life itself.
This material is issued and has been prepared by a representative of BNP PARIBAS ASSET MANAGEMENT Australia Limited (“BNPP AMAU”) AFSL 223418 ABN 78 008 576 449. This material is produced for information purposes only and does not constitute:
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