London: Climate conscious investors have channeled billions of dollars into clean energy but investment flows into protecting and better managing the world’s ecosystems remain minute by comparison. This could change after negotiators at the U.N. nature summit in Montreal secured long-awaited formal support on Monday (December 19), for a Global Biodiversity Framework to protect nature. But plans have yet to be fleshed out on how to channel the huge amounts of capital from private and public sector sources that scientists say are necessary for conservation.
A growing crowd of investors aiming to manage their money with environmental, social and governance (ESG) considerations in mind are looking to the deal for indications of the future shape of new financial instruments and rules to protect forests, marshes, waters, and everything in between. Some managers have already pressed ahead. Around 74.3 billion euros ($78.8 billion) are already invested in funds aimed at protecting ecologically sound environments on land, air and water, according to data from Morningstar.
Morningstar lists 175 funds that run investment strategies that are intended to invest in companies, or securities, that are involved in industries that positively impact the environment. It groups these funds together under a theme it calls healthy ecosystems.
The five largest equity healthy ecosystem funds are managed by Pictet, BNP Paribas Asset Management and Amundi and account for 21.6 billion euros, or nearly a third of the entire group. These funds are largely concentrated in the industrials and utilities sectors: six out of 10 largest funds are overweight the benchmark weighting of industrials in the MSCI ACWI Index (USD) while half of the funds are overweight utilities.
Investment strategies targeting biodiversity specifically are an even more nascent product. Just 907.6 million euros are invested in Morningstar’s top 10 equity funds with biodiversity in their name. Limited data collection and reporting and the difficulty of measuring a company’s impact on biodiversity are all seen as major barriers for investment to money managers.
We know the global economy and every company in it is negatively impacting biodiversity. At the moment we can only assess the negative impact (on biodiversity) of the companies in our portfolio, this is why more biodiversity funds don’t exist and why regulation is arguably dragging, Tom Atkinson, portfolio manager at AXA Investment Managers, which has a 117 million euro Article 9 biodiversity impact fund.
Like the broader healthy ecosystems group of funds, biodiversity-named funds are largely concentrated in industrials like agricultural equipment manufacturer Deere & Co and U.S. water technology provider Xylem with 30 per cent of individual holdings from a universe of 60 stocks directed to this sector.
Consumer comes a close second however, with 27 per cent of holdings invested in companies like Nestle, L’Oreal and Darling Ingredients, a company that turns edible by-products and food waste into sustainable products and renewable energy.
Three of the six largest biodiversity-named funds assessed by Reuters are overweight industrials versus the MSCI ACWI Index (USD).
With a global biodiversity framework in place and efforts well underway to create a nature reporting framework for companies — the Taskforce on Nature-Related Financial Disclosures — as well as a new tool to measure positive impact on biodiversity due early 2023, managers like Atkinson are predicting investment flows will increase next year.
(This story has not been edited by NDTV staff and is published from a syndicated feed.)
NDTV – Dettol have been working towards a clean and healthy India since 2014 via the Banega Swachh India initiative, which is helmed by Campaign Ambassador Amitabh Bachchan. The campaign aims to highlight the inter-dependency of humans and the environment, and of humans on one another with the focus on One Health, One Planet, One Future – Leaving No One Behind. It stresses on the need to take care of, and consider, everyone’s health in India – especially vulnerable communities – the LGBTQ population, indigenous people, India’s different tribes, ethnic and linguistic minorities, people with disabilities, migrants, geographically remote populations, gender and sexual minorities. In wake of the current COVID-19 pandemic, the need for WASH (Water, Sanitation and Hygiene) is reaffirmed as handwashing is one of the ways to prevent Coronavirus infection and other diseases. The campaign will continue to raise awareness on the same along with focussing on the importance of nutrition and healthcare for women and children, fight malnutrition, mental wellbeing, self care, science and health, adolescent health & gender awareness. Along with the health of people, the campaign has realised the need to also take care of the health of the eco-system. Our environment is fragile due to human activity, which is not only over-exploiting available resources, but also generating immense pollution as a result of using and extracting those resources. The imbalance has also led to immense biodiversity loss that has caused one of the biggest threats to human survival – climate change. It has now been described as a “code red for humanity.” The campaign will continue to cover issues like air pollution, waste management, plastic ban, manual scavenging and sanitation workers and menstrual hygiene. Banega Swasth India will also be taking forward the dream of Swasth Bharat, the campaign feels that only a Swachh or clean India where toilets are used and open defecation free (ODF) status achieved as part of the Swachh Bharat Abhiyan launched by Prime Minister Narendra Modi in 2014, can eradicate diseases like diahorrea and the country can become a Swasth or healthy India.