Biodiversity is the sum of life on Earth in all its forms, from simple genetic structures, plants and trees, to animals, sea creatures, bacteria and humans. The Convention on Biological Diversity defines it as “the variability among organisms from all sources, including terrestrial, marine and other aquatic ecosystems, and the ecological complexes of which they are part. This includes diversity within species, between species, and of ecosystems.”

Ecosystems are functional units of the living (plants, animals, microorganisms) and the non-living (air, minerals, water) all interacting together to form forests, wetlands, grasslands, coral reefs or other natural masses. ‘Nature’ includes the living and non-living, though in practical terms, nature and biodiversity tend to be used interchangeably.

Ecosystem services are the goods and services that we harvest and extract from nature, such as food, water, fibers, timber and medicines, along with cultural services such as gardens, parks and coastlines. Nature’s processes also preserve and regenerate soil, control floods, filter pollutants, assimilate waste, pollinate crops, maintain the hydrological cycle, regulate the climate and fulfil many other functions.

In all, biodiversity is essential for healthy ecosystems, while biodiversity loss erodes their foundation. Without them, our economy and society as we know it would not be possible. The interactions between biological elements that create our food chains have ensured that the planet has been habitable for its multitude of species on land and sea for millions of years. But now it is under threat.

Research shows that biodiversity is now declining faster than it has at any other time in human history: the current rate of extinction is tens to hundreds of times higher than the average over the past 10 million years. For this reason, scientists warn that we are in the middle of the ‘sixth mass extinction’, following the fifth one which wiped out the dinosaurs 65 million years ago.¹

Unsustainable human development is putting up to one million species at risk of extinction, many of them within decades, according to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Service’s (IPBES) Global Assessment of 2019. This is shown in the chart below.

Figure 1 - Extinction risks on the International Union for Conservation of Nature (IUCN) Red List

Source: IPBES

The average abundance of native species on land has already fallen by at least 20% since 1900, when the advent of motorized land transport made more of the Earth accessible to developers. In rivers and oceans, more than 40% of amphibian species, almost 33% of reef-forming corals and more than one-third of all marine mammals are threatened by unsustainable human activity.

IPBES identified five main drivers of biodiversity loss. These are: ²

1. Land and sea use: This has been led by deforestation and agricultural expansion on land, and over-fishing at sea, to meet the increasing demands of the rising global population. Around 420 million hectares of forest – an area half the size of the United States – and 86% of wetlands have been lost since 1990, while 23% of land has been degraded globally. Around 30% of fish stocks are becoming endangered through overexploitation
   
   

2. Climate change: Due to the relentless emissions into the atmosphere, the world has warmed by 1.2 degrees since the begin of the Industrial Revolution in the 18th century. This is causing more extreme weather such as more powerful hurricanes, forest fires, floods and droughts, with little time left to achieve carbon neutrality by the 2050 deadline.
   
   

3. Pollution: The emission of chemicals and toxic waste is deadly for biodiversity. The use of pesticides is killing bees and other essential pollinators that are critical for our food systems. There is now so much plastic in the ocean it is set to weigh more than the fish in it by 2050, while 80% of all wastewater including human effluent is untreated.
   
   

4. Direct exploitation of natural resources: Industries such as mining are responsible for the loss of habitat that have become the main threat to the survival of species on land. Restoring just 15% of ecosystems could cut extinctions by 60% while also benefiting local economies.³ Paradoxically, extracting materials that are vital to the net zero transition such as lithium to use in electric car batteries sometimes comes at the expense of the environment.
   
   

5. Invasive species: A consequence of the global economy, along with the growth of modern tourism, the introduction of non-native species has contributed to 40% of extinctions since the colonial era began in the 17th century. The cost of invasive pests in colonized parts of the world including Australia, Brazil and the US are estimated to be USD 137 billion per year.⁴

Biodiversity loss is inextricably linked with climate change – indeed, they are often seen as two sides of the same coin. Oceans are the world’s greatest carbon sink, absorbing emissions while creating oxygen at the same time. Its increasing acidification along with relentless pollution has led to 40% of the world’s oceans becoming ‘disturbed’, according to IPBES.

Deforestation is making climate change worse, since billions of tons of greenhouse gases are emitted when trees are felled, particularly if they are burned for land clearance. The loss of the trees simultaneously reduces one of the world’s greatest carbon sinks which, like the oceans, both absorb emissions and generate oxygen. Deforestation alone accounts for about 17% of global warming, according to the World Economic Forum.⁵

The conservation of forests and other ecosystems such as peatlands is therefore seen as critical to achieving the 2015 Paris Agreement goal of limiting global temperature rises to 2°C by the end of this century, and more ideally to 1.5°C. Reforestation could potentially cut emissions by up to 11.7 gigatons of CO₂ equivalent per year by 2030, over 40% of what is needed to limit global warming, IPBES says.

The solution lies in ‘bending the curve’ – halting and reversing the five drivers of biodiversity loss by scaling back the footprint of human production and consumption. The Kunming-Montreal Global Biodiversity Framework signed in 2022 by 188 countries agreed that bending the curve before 2030 was essential. This is discussed more fully in the next chapter.

Figure 2: Bending the curve 

Source: Robeco, Bloomberg. ⁶

As with the Paris Agreement on climate, the agreement requires countries to develop and execute plans and targets that can steer the transition of society to a more nature-positive economy. Companies and investors are expected to disclose risks and opportunities and to align their businesses and investments. Subsequently, the Kunming-Montreal agreement implies an overhaul of our ways.

Increasing our conservation efforts will not be enough though to get us on the path of no net loss of biodiversity. We need to critically change how we produce and consume goods. We need to allow nature to replenish the demands we place on it so it can continue to provide all the services and benefits we need. We depend on nature to provide a habitable and healthy planet: without one, we cannot have a healthy society or economy. There is no ‘Planet B’.

For global investors, bending the curve is not only a major challenge, but also offers two major opportunities. As shown in Figure 2, the first is in the biodiversity transition; changing production and consumption methods affects an industry with a market capitalization of USD 2.3 trillion.

The second is in the solutions available. Technologies that can reduce threats, such as wastewater treatment, are worth around USD 800 billion. Moreover, bio-positive solutions such as organic plant protection or soil remediation offer a further USD 180 billion of investments. Such risks and opportunities are becoming more relevant and material for investors, as discussed in the next chapter.

You should now know how biodiversity, ecosystems and ecosystem services are defined; understand the five main drivers of biodiversity loss and its link to climate change; and be able to explain how ‘bending the curve’ offers solutions including vast new markets.

Footnotes

¹ International Union for the Conservation of Nature https://www.iucn.org/news/commission-environmental-economic-and-social-policy/202205/exploring-possible-futures-conservation-ngos-a-report-luc-hoffmann-institute
² https://www.unep.org/news-and-stories/story/5-key-drivers-nature-crisis
³ Restoring Converted Land Could Help Mitigate Climate Change (azocleantech.com)
⁴ Invasive Pests and Diseases (usda.gov)
⁵https://www.weforum.org/agenda/2017/06/drones-plant-100000-trees-a-day/
⁶ Illustration adapted from Leclère et al, Nature, 2020, Adam Islaam International Institute for Applied Systems Analysis (IIASA), Citi Research & Global Insights

Protecting biodiversity isn’t simply an issue of saving the habitat of an exotic frog, eating more organic fresh produce or buying a reusable water bottle. It’s much more profound than that. Put simply, nature underpins everything that we do, and without it, the world cannot function. This is not just a moral obligation – it is an economic imperative.

More than half of the world’s economic output valued at USD 44 trillion is at least moderately or highly dependent on nature in some way, according to the World Economic Forum (WEF). For food production, the ratio is even higher, as more than 75% of global crops, including fruit and vegetables, rely on pollination.⁷ If natural systems collapse due, for example to the loss of bees and other pollinators, so will our economic and financial systems.

Figure 3: Double materiality in biodiversity 

Source: Robeco

Still, the degradation of ecosystem services continues unabated. Aside from the irreversible loss of certain species, it represents an economic loss of at least USD 479 billion per year.⁸ Droughts shut down river transport in Europe in 2022 with the attendant loss of industrial goods that could not be shipped. Meanwhile, much real estate is becoming uninsurable due to the threat of floods or forest fires, or landslips in coastal regions.

Eco-deterioration also brings along social pressures, such as the demonstrations by farmers seen in the Netherlands over attempts by the Dutch government to cut nitrogen levels in agricultural land. The growth of the global economy in the last decades has come largely at the expense of the biosphere, with much of it caused by inefficient or pollutive food production.

Figure 4: Growth at the expense of biodiversity

Source: Researchgate.net ⁹

This relentless attack on the Earth’s precious biosphere has become one of the greatest risks to the future prosperity of people on the planet. A WEF survey of more than 1,000 investors, politicians and experts showed that respondents placed it as the third-highest global risk by severity, behind climate action and the extreme weather that global warming has brought.

The survey placed it higher than infectious diseases – despite the recent memory of the ravages of Covid-19 – and the kind of geo-economic confrontation seen when Russia invaded Ukraine. The speed of change is also remarkable, since biodiversity loss was not placed as a top-five threat prior to 2019.

Figure 5: Top 10 global risks 

Source: WEF

Biodiversity loss and an unsustainable reliance on nature directly affects investments in the real economy. Tools such as the Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE) can be used by asset managers to assess the level of their exposure to high biodiversity impacts and dependencies. An assessment of Robeco’s assets under management in 2022 showed that:

• Around one-quarter of assets are in sectors that are either highly or very highly dependent on at least one ecosystem service. The provision of ground and surface water alone proved to be the most material, followed by climate regulation and water flow maintenance.

• Around 29% of investments are in sectors that have potentially high or very high impacts on key drivers of biodiversity loss. Use of land and freshwater was identified as having the largest impacts, followed by climate change, pollution and direct disturbances.

• The highest exposures with impacts and/or dependencies were found in the pharmaceuticals, integrated telecommunication services, specialty chemicals, packaged foods and meats, apparel, accessories and luxury goods industries.

Figure 6: Impacts on assets under management

Source: Robeco

To better understand the values of future impacts on investments, financial supervisors have been assessing biodiversity as a systemic risk for several years. Models are being developed to quantify the effect on financial risks and returns, though these are still immature. Regulatory action is discussed more fully in the next chapter.

At the same time, nature offers many opportunities which are being increasingly recognized. Transitioning to a more nature-positive economy could unlock USD 10 trillion of business opportunities and create 395 million new jobs by 2030, according to the WEF’s Future of Nature and Business report.

This would be done by transforming the three economic systems that are responsible for almost 80% of nature loss, namely food, ocean and land use; infrastructure and the built environment; and energy and extractives. It means ecosystems can be viewed as important assets that can still be monetized, but in a more sustainable way.

Figure 7: Turning transitions into opportunities

Source: WEF¹⁰

Tackling food waste offers a simple yet effective opportunity to reduce pressure on the land. Globally, about one-third of food produced is lost every year, so cutting out this waste would save time, energy resources and costs. On the revenue front, changing consumer preferences led by Millennials means sales of organic food and beverage products are expected to grow by 14% a year in a market that in 2022 was worth about USD 200 billion, and is growing rapidly.¹¹ These kinds of business opportunities are further discussed in Chapter 4.

Biodiversity is also relevant for investors through the ethical and stewardship responsibilities they have as custodians of other people’s money. Sustainable investing is often defined as making returns for the present (and retiring) generation without compromising the needs of future generations.

To meet these stewardship commitments, most investors are committed to active ownership, using their power as shareholders and bondholders to affect change at investee companies that are nature-dependent or destructive. This is done through engaging with companies, either individually or collaboratively (see Chapter 4), and through voting at corporate annual general meetings (AGMs) on sustainability issues, including biodiversity.

The Nature Action 100+ collaborative group, for example, is focused on engaging with the world’s largest contributors to biodiversity loss, working in a similar way to the Climate Action 100+ group. This is also discussed more fully in Chapter 4.

In short, if we compare our economic system to a food chain, the financial sector can be considered to be at the top of it. This sector therefore has a crucial role to play in addressing the climate and biodiversity crisis.

You should now understand how half the world’s economic output is highly dependent on nature; why it’s also a USD 10 trillion business opportunity in the growth areas; and how heatmap assessments can identify vulnerable investment assets.

Footnotes

⁷ Herweijer et al 2020, Nature Risk Rising: why the crisis engulfing nature matters for business and the economy, World Economic Forum
⁸ https://naturalcapital.finance/wp-content/uploads/2020/06/Beyond-Business-as-Usual-EN.pdf
⁹ https://www.researchgate.net/figure/Global-Wealth-per-Capita-1992-2014-Source-Managi-and-Kumar-2018_fig8_356273136
¹⁰ https://www3.weforum.org/docs/WEF_The_Future_Of_Nature_And_Business_2020.pdf
¹¹ Packaged Facts, OTA Survey, Maximize Market Research

Biodiversity has not yet enjoyed the same high profile as climate change when it comes to legislation, regulation or investor interest, but this is improving. Several international summits and initiatives have begun to prioritize this issue, while the EU is developing its own approach wholly devoted to biodiversity protection.

Meanwhile, a growing number of investor tools and collaborations are helping to prevent biodiversity loss, many of them mirroring existing initiatives to tackle global warming. Legislation, regulation and collaboration is therefore increasingly focused on treating biodiversity and climate change as a ‘twin emergency’.

The first major attempt to protect biodiversity came with the Convention on Biological Diversity which first met at the Earth Summit in Rio de Janeiro in 1992. This set out a framework on how biodiversity protection could be financed in the medium term and was ratified by 196 countries. A Conference of the Parties (COP) to the convention began to meet biannually from 1994.

Figure 8: Kunming-Montreal Global Biodiversity Framework

Source: Convention on Biological Diversity¹²

The most recent meeting, COP 15, was held in two stages in Kunming, China in 2021, and at Montreal, Canada in 2022. It produced the Kunming-Montreal Global Biodiversity Framework (GBF) with a grand vision of no more nature loss by 2030, and from thereafter, nature-positive development to live in harmony with nature by 2050.

To achieve this, four goals were set:

• Maintaining and restoring the integrity of the Earth’s natural ecosystems by 2050

• Using natural resources economically in a more sustainable way

• Sharing these resources more appropriately with indigenous people; and

• Closing the USD 700 billion/year biodiversity finance gap between developed and emerging markets. ¹³

The goals contain 23 targets, the most significant of which is the ‘30 by 30’ target. This aims to designate 30% of the world’s surface across land and oceans as protected areas by 2030, achieved through the periodic ratcheting of national targets and policies, and through the alignment of business models and financial flows. As such, the 2030 goal is the biodiversity equivalent of net zero 2050 and the horizon for ‘bending the curve’ as seen in Chapter 1.

Other significant targets include halving food waste; halving the impact of excess nutrients and agrochemicals; ending plastic discharge; reducing harmful subsidies; and requiring companies and investors to disclose their nature-related risks and align their activities with the targets.

Such is the ambition of the GBF in stating that “reversing the loss of biological diversity, for the benefit of all living beings, is a common concern of humankind.” Its proponents hope it will become the equivalent in status of the Paris Agreement.

Regulators and supervisors of the financial system play a key role, since they set the tone for market participants in their jurisdictions. The Network for Greening the Financial System (NGFS) is a grouping of financial regulators with an overarching remit to make the world more sustainable, including the response to climate change.

The NGFS acknowledges that nature-related risks could have significant macroeconomic implications and should therefore be considered by central banks and supervisors. It is working to mainstream the consideration of nature-related risks and set disclosure requirements for financial institutions in assessing these risks.

The European Central Bank (ECB) is also making its own assessment of biodiversity risks across the EU’s financial system after finding that 75% of Eurozone bank loans are to companies that are nature-dependent.

The EU has launched its own Biodiversity Strategy which aims to put it on a path to recovery by the 2030 target, and contains specific actions and commitments. ¹⁴It forms part of the wider European Green Deal which aims to decarbonize the block in the move towards net zero, become nature-positive, and create a more circular economy.

The strategy contains specific commitments and actions to be delivered by 2030 and will be diligently legislated. For example, the EU recently approved its first ever Nature Restoration Law, which includes an overarching restoration objective across the bloc’s land and sea territories, with binding targets for specific habitats and species. ¹⁵

In June 2023, an EU deforestation regulation came into effect. The new law aims to ensure that key goods exported or placed on the EU market did not come at the expense of deforestation or forest degradation in global supply chains.¹⁶ Other laws are being prepared on topics such as pesticides, water quality and per- and polyfluoroalkyl substances (PFAS). These contribute greatly to the pollution driver of biodiversity loss, which is discussed more fully in Chapter 5.

In terms of specific regulation for the financial sector, the Sustainable Finance Disclosure Regulation (SFDR) requires investors to follow Principal Adverse Impact Indicators, including impacts on biodiversity. ¹⁷Finally, the EU Taxonomy will include a section entitled: ‘The protection and restoration of biodiversity and ecosystems’ to define what types of investment actually address biodiversity loss.¹⁸

You should now be able to explain why the Kunming-Montreal Framework seeks no more nature loss by 2030; the role played by central banks, regulators and financial supervisors; and the vision of the EU Biodiversity Strategy as part of the European Green Deal.

Footnotes

¹² https://www.cbd.int/gbf/
¹³ https://www.cbd.int/conferences/post2020
¹⁴ https://environment.ec.europa.eu/strategy/biodiversity-strategy-2030_en#
¹⁵ https://environment.ec.europa.eu/topics/nature-and-biodiversity/nature-restoration-law_en
¹⁶ https://environment.ec.europa.eu/news/green-deal-new-law-fight-global-deforestation-and-forest-degradation-driven-eu-production-and-2023-06-29_en
¹⁷ https://finance.ec.europa.eu/regulation-and-supervision/financial-services-legislation/implementing-and-delegated-acts/sustainable-finance-disclosures-regulation_en
¹⁸ https://finance.ec.europa.eu/system/files/2021-04/sustainable-finance-taxonomy-faq_en.pdf

Biodiversity loss is a relatively new topic for investors. Just two years ago, only 5% of asset owners or managers surveyed by the Robeco 2021 Global Climate Survey said biodiversity would be ‘central’ to their investment policy over the following two years, while 16% said it would be ‘significant’. In the 2023 survey, those responses had risen to 18% and 48% respectively, moving it into the mainstream.

Figure 9: Results of the 2023 Robeco Global Climate Survey

Source: Robeco Global Climate Survey

How to quantify this kind of commitment has, however, been lacking. Up until 2023 there was no universally agreed means of actually assessing and then reporting on corporate and investor impacts on biodiversity. The Taskforce on Nature-related Financial Disclosures (TNFD) aimed to close this gap when it published its first framework in 2023.¹⁹

It is modeled on the Task Force on Climate-related Financial Disclosures (TCFD), in which companies are guided in how to calculate the effect their operations are having on global warming. Backed widely by companies and investors, including Robeco the TNFD consists of 40 individual members representing financial institutions, corporates and market service providers with more than USD 20 trillion in assets.

The TNFD will focus on creating and developing a framework for the market to price in nature-related risks and opportunities, and then direct capital accordingly. Some 24% percent of investors in the 2023 Climate Survey cited the lack of clear reporting standards and disclosures as one issue stopping them from putting biodiversity higher up their priorities.

Laying down a firm investor commitment to making biodiversity such a rising priority was formalized during the Biodiversity Summit of the United Nations General Assembly in 2020. The Finance for Biodiversity Pledge was signed by 26 financial institutions including Robeco, calling on world leaders to agree on effective measures to reverse nature loss in this decade to ensure ecosystem resilience.

By signing the pledge, investors took the following commitments, to be delivered by 2024: 

This led to the creation in 2017 of Nature Action 100, a collaborative theme providing the biodiversity equivalent of Climate Action 100+, which engages with the 100 largest emitters to reduce their carbon footprints. Nature Action 100 aims to do the same by engaging with the 100 companies that have the biggest impacts on biodiversity.²⁰

The investors participating in the initiative will focus on engagement with investee companies in key sectors that are deemed to be systemically important in reversing nature and biodiversity loss by 2030. These include pharmaceuticals; agricultural chemicals; household and personal goods; meat and dairy products; metals and mining. These sectors are major drivers of nature loss due to their large impacts on habitat loss, overexploitation of resources, and pollution.

Robeco has first-hand experience in collaborating to embrace external expertise in order to integrate biodiversity into the investing and engagement process. We worked closely with the World Wide Fund for Nature Netherlands (WWF-NL) to create a 2022 white paper which formed a blueprint for future policy and acted as the bedrock for biodiversity-based investment products.²¹

WWF-NL is working with Robeco to integrate biodiversity into asset management, such as advising on the development and implementation of a biodiversity investment framework. WWF-NL is now advising Robeco on engagement efforts to further the transition of investee companies to more nature-friendly business models. The collaboration also aims to inspire and activate other stakeholders in the financial sector to implement biodiversity into their investments.

Figure 10: Partnership WWF-NL

Source: Robeco

“The financial sector has a pivotal role in shifting capitals towards a nature positive financial system, redirecting financial flows to practices that can restore nature instead of destroying it,” WWF-NL says. ” We call on all of the financial sector to reduce nature-related risks and future-proof businesses and portfolios by immediately making commitments, taking action, and calling for change. We believe that systemic change requires us to re-think which companies are a part of the solution towards a nature positive economy.”

There are many other initiatives with a common or shared goal of progressing biodiversity in some way. For example, the Finance Sector Deforestation Action is an investor group that has signed the Financial Sector Commitment on Eliminating Agricultural Commodity-Driven Deforestation. This complements work on stopping deforestation in palm oil (see our case studies in Chapter 6).

And the Science Based Targets Network aims to equip companies and local governments with definitions for clear pathways to address their impacts and dependencies on nature. It builds on the momentum of the Science Based Targets initiative (SBTi), which developed methodologies for calculating impacts on climate change. Both form part of efforts for all organizations to have a measurable means of furthering the SDGs using policy milestones.

You should now recognize the vital role of the Taskforce on Nature-related Financial Disclosures; be able to list the investor initiatives such as the Finance for Biodiversity Pledge and Nature Action 100; and see how engagement can help reduce the biodiversity impact of investee companies.

Footnotes

¹⁹ Sustainable investing -Task Force on Nature-related Financial Disclosures (TNFD)
²⁰ https://www.natureaction100.org/
²¹ Robeco launches biodiversity paper and teams up with WWF-NL

Investment opportunities in biodiversity emanate from the transition of the industries, sectors or companies that have a high impact on one or more of the five drivers of biodiversity loss. It is not just about bees and butterflies – important though that is – or even apparently simple solutions like commercial reforestation. As with climate change, it’s about rewiring the entire productive system towards a more circular, nature-positive and net zero economy.

Companies can therefore reduce pressure on nature by reworking their products and services into something that helps this transition; of the 43,000 listed companies worldwide, only 0.01% are currently nature-positive. Another opportunity is investing in pure-play solutions such as aquaculture or recycling.

Here we can go back to ‘bending the curve’ – lowering the biodiversity (and carbon) footprints of production and consumption through greater use of certifiably sustainable products, recycling, or more sustainable packing, to name but a few. Technology can also play a role in waste treatment, carbon capture, biofuels and green infrastructure.

To recap on chapter one, the five main drivers of biodiversity loss are land and sea use; climate change; pollution; natural resource exploitation; and invasive species. Here are the potential commercial solutions, with some overlap between them.

By far the biggest area for reducing biodiversity loss, investment opportunities take many forms, from more efficient land cultivation and forest or wetlands restoration, to greater production of organic food and developing alternatives to meat. It is also about reducing food waste, the redesign of products and the recycling of materials to reduce the use of virgin materials in construction, apparel, chemicals, and other extractive industries.

Investment opportunities target crop, fruit and vegetable farming, developing alternatives to pesticides and nitrogen-rich fertilizers, and building more green infrastructure. The market for eco-friendly furniture sourcing wood from sustainable sources is growing by 7% per year to USD 38 billion. Natural personal care products that use bio-based compounds instead of chemicals is a market worth around USD 13 billion. ²²

The organic food and beverages market was worth about USD 350 billion a year in 2023 and is expected to reach USD 500 billion by 2026, growing at 30% per year since 2019. Part of the attraction of this market is that buyers – often led by Millennials – are willing to pay a premium for food that hasn’t been produced with pesticides.

Figure 11: The projected market for organic food 

Source: Robeco

Even the more specialist parts of the market are valuable: non-dairy probiotic yogurts, for example, have sales of about USD 18 billion. The market for meat alternatives is worth around USD 5 billion, while the market for dairy alternatives such as soy milk could be worth up to USD 16 billion.

For seafood, more sustainable fishing is ultimately required to save fish stocks, but aquaculture – where seafood such as salmon or crustaceans are farmed, sometimes in inland waterways – is a growing business. Biotechnology is helping, as salmon vaccination has been shown to reduce mortality from 30% to 5%, which increases the harvest value by 35%. ²³

The biggest market for combating climate change which in turn is impacting biodiversity is in renewable energy – though it does have its flipsides. Wind turbines, for example, kill thousands of birds per year. However, contributing to the greater goal of cutting emissions is vital if the world is to meet net zero 2050 (climate) and no net loss 2030 (biodiversity) commitments.

This has brought unprecedented investment opportunities in not only renewable energy infrastructure, such as solar panels and wind turbines, but the technology behind it. Expanding the electricity grids needed to distribute electricity is essential, accounting for 30% of all the investment needed in the renewable energy transition. Green hydrogen is also a potentially massive market, particularly for heavy transport such as HGVs and shipping.

Electric cars offer a way to slowly convert the 1.2 billion petrol-driven vehicles across the world, though like with renewable power, it does often come at a wider cost. Mining the manganese and lithium needed for electric car batteries, for example, has led to environmental damage and habitat destruction. Sea bed mining is being offered as a means of finding valuable minerals such as cobalt that are scarce on land, but this also comes at an environmental cost.

Carbon capture and storage (CCS) – which stops CO₂ from entering the atmosphere – is still a small market worth about USD 1.2 billion, though it is growing at about 20% per year. More than 300 CCS projects are planned worldwide, with the target of capturing 220 million tons of CO₂ per year by 2030. Nascent technologies like direct air capture – which extracts CO₂ directly from the atmosphere – are expected to grow, projected to capture 60 million tons of CO₂ by 2030. ²⁴

Figure 12: Potential investment opportunities 

Source: Robeco

The best way to address pollution is to stop it entering the atmosphere or watercourse in the first place. The market potential for technological solutions making single-use plastic bottles redundant is huge. Currently, 80% of single-use plastic bottles are discarded after the product is consumed, and much of it ends up polluting the oceans. Solutions here focus on recycling technologies, and building reusable, biodegradable containers that can be discarded without harming the environment.

The industrial wastewater treatment market is worth USD 12.5 billion, while hazardous waste management is much larger at USD 70 billion. Developing more natural fertilizers is seen as key to solving the nitrogen crisis, in which the nitrogen seeps into watercourses and gradually degrades soil quality. Acidification prevention solutions that also neutralize the effects of pesticides and fertilizers can further help reduce habitat degradation in rivers.

A particular problem here are PFAS that encompass more than 4,700 of man-made chemicals with similar molecular structures that have been mass produced since the 1940s. They can be found in everything from non-stick cookware to electronics, food packaging and stain-resistant textiles. ²⁵

Their strong, heat-resistant chemical bonds are in manufacturing and also mean they are virtually indestructible in the environment, leading to their nickname of ‘forever chemicals’.

Decades of their use mean they are now contaminating the soil and water courses, while certain types have passed through the food chain and have now been found in humans. Their negative health effects have led many governments including US and EU member states to ban the production of some PFAS.

Reforestation and sustainable forestry have become a major investment opportunity, along with incorporating biodiversity into infrastructure. For example, the market for green roofs, where plants are incorporated into the flat tops of buildings, is growing at about 15% per year. Planning green spaces into urban developments is also now compulsory in many countries.

Construction firms and real estate developers that have conservation capabilities, or can establish smarter building methods, such as in the use of solar panels on roofs, or water conservancy in pipework, will have a competitive advantage and make attractive investments.

Another market is in traceable materials, which focuses on more sustainable production of foods and fibers, and the more efficient use of raw materials. Traceable product opportunities include companies that process and sell sustainably certified foods, clothing and hygiene products with high levels of recycled inputs that lower the biological burden of fibers. Certifying palm oil to ensure that plantations are run sustainably, and new growth does not cause deforestation, has been quite effective in reducing pressure on this valuable resource (see Chapter 7 on case studies).

Where the environment has already been damaged by industries, such as mining and environmental remediation, the clean-up of former industrial sites is a market estimated to be worth USD 92 billion. And an increasingly important way to deal with this driver is not to exploit natural resources in the first place, but to recycle or refurbish existing resources. This is core to the circular economy principle (see Chapter 6) and the growing recycling market, backed by regulation that aims to phase out single-use plastic, for example.

The investment opportunities for tackling invasive species are much more specialized, and center around ‘biosecurity’ – stopping non-indigenous animal or plant life from entering the territory in the first place. Investments include companies making detection technology to spot insects traveling in containers with fruit that can then disrupt the native wildlife should they make it onto land.

Tracking parasites found in the ballast water of ships that then enter the local watercourse is another means of invasive species prevention. Biosecurity technology can also monitor species already there with a view to managing or lessening their impact.

You should now recognize the necessity of investing in the transition of industries that impact the five drivers; see why more efficient land use and addressing climate change are key; and understand the ample opportunities from organic food and forestry to biotechnology.

Footnotes

²²Sources for market sizes: Robeco analysis, Global Market Insights GrandView Research, EMR, MENAFN, Allied Market Research, OMR . Assessment as of Q1 2022.
²³ https://www.nature.com/articles/s41598-021-93874-6
²⁴ https://www.iea.org/reports/direct-air-capture
²⁵ Sustainable investing - PFAS

Nature is complex and covers many different issues, from deforestation and water scarcity, to pollution and unsustainable farming. Consequently, unlike with climate change, we do not have a single globally agreed metric to capture biodiversity loss.

It may be relatively easy to count the number of trees being chopped down, or make estimates for fish stocks or endangered species through life cycle impact assessment (LCIA) methodologies, but assessing the impacts of companies on biodiversity loss (or gain) is vastly more difficult. This is further compounded by the relationship of finance with nature, as seen in previous chapters.

Part of the problem is that unlike assessing emissions or decarbonization to calculate corporate readiness for net zero, biodiversity is essentially localized. A carbon atom can be counted wherever it is released, and we can calculate carbon equivalence for emissions. But the same thing doesn’t exist for biodiversity loss with the same level of credibility.

From the ten core metrics proposed by the TNFD, only the first one for greenhouse gas emissions is relatively easy to measure, while four other metric proposed to measure water consumption, waste generation, air pollutants and changing land use are somewhat flimsy. Others have yet to be properly defined.

In a global economy, it can also be very difficult to know what's happening in a corporate supply chain, particularly when sourcing commodities such as timber, soy or palm oil. Spy satellites can help in spotting deforestation, but these tend to only identify broad patches; one still needs to examine the biodiversity loss on the ground, where access can be difficult.

Figure 13: The Sentinel-1 spy satellite can spot deforestation from space

Source: Science Advances

As biodiversity is still relatively new as an investment topic, getting hold of ESG-style research and ratings can be hard to track down, though data providers are working to fill this need. And while ESG scoring is now widespread, very few data providers are able to attribute some kind of score to a company’s rating.

The 2023 Robeco Global Climate Survey cited “a lack of suitable investment data, research and ratings” as the number one problem facing investors when seeking to take account of biodiversity in their investment portfolios. This was followed by “a lack of internal expertise”. Very few investors have biodiversity specialists who are qualified to advise their teams. Instead, many are developing links with local universities who can provide external expertise, or are teaming up with NGOs.

Figure 14: The challenges seen by 300 investors who gave responses to the Global Climate Survey 2023

Source: Robeco Global Climate Survey

One thing we can measure is the boundaries that must not be crossed if we are to protect biodiversity and avoid irreversible climate change. Research undertaken by the Stockholm Resilience Centre analyses threats to what they have termed ‘planetary boundaries’ – nine thresholds for the continuance and sustainability of life on Earth.

As shown in the graphic below, these boundaries are identified (clockwise from the top) as climate change, novel entities, stratospheric ozone depletion, atmospheric aerosol loading, ocean acidification, biogeochemical flows, freshwater change, land system change and biosphere integrity.

Figure 15: Planetary boundaries  

Source: Stockholm University²⁶

According to this research, six of these boundaries have already been exceeded. The most startling one is biosphere integrity, where genetic integrity has been so badly compromised it is the only one of the nine boundaries to have reached the top end of the ‘high risk zone’. Within the same category, the functional integrity of the biosphere is at the top end of the ‘zone of increasing risk’.

The threat posed by novel entities is also well into the increasing risk zone and approaching high risk. These are man-made chemicals, long-life pollutants such as the PFAs, and radioactive materials released since the nuclear age began in the 1940s. Biogeochemical flows, which have a lower threshold for the point at which the boundary is reached, are in the high risk zone. These flows underpin the rhythms of nature and the ways in which ecological systems depend on each other.

For climate change, radiative forcing – the difference between the solar energy that enters the Earth's atmosphere and the heat that leaves it – is in the high-risk zone due to the greenhouse effect, while CO₂ concentration is in the zone of increasing risk. Freshwater change and land system change have both entered the increasing risk zone.

Only three things are still in their ‘safe operating space’: stratospheric ozone depletion and atmospheric aerosol loading, partly thanks to the phasing out of CFCs from aerosol sprays from the 1980s; and ocean acidification. However, some of the damage from issues such as atmospheric aerosol loading cannot yet be fully quantified, and so could be worse (or better) than thought.

And while the boundaries offer a good compass at the global macro level, the challenge is to translate it to specific sectors, and then to companies. For this we need sector transition pathways that serve as benchmarks to assess companies, like we do for climate with sector decarbonization pathways, but the science for this does not yet exist.

Another headwind cited in the climate survey has been a lack of suitable investment strategies specifically targeted at biodiversity. Very few asset managers offer pure-play products; Robeco only launched its own Biodiversity Equities strategy in November 2022. As an alternative, thematic investment strategies targeting the SDGs including the biodiversity-relevant goals of SDG 14 (Life below water) and SDG 15 (Life on land) can be a way into this.

Figure 16: The Sustainable Development Goals

Source: UN

Furthermore, greenwashing continues to obscure the true impact of products or services on biodiversity and a poor understanding of ‘risk versus return’ considerations. Investors also complained about regulations that hinder or deter investors from taking account of biodiversity, and the lack of information on the impact of climate change on biodiversity loss.

In our geopolitical world, the wrong kinds of incentives and subsidies offered by governments are a major challenge. About USD 1.8 trillion of subsidies a year are linked to activities that lead to nature destruction across the world, including extracting fossil fuels and maintaining agriculture. Public policy frameworks are usually lacking, particularly in emerging markets.

At sea, economic incentives and policies in the fisheries sector have led to the overexploitation of 76% of the world’s marine fish stocks, according to the UN’s Food and Agriculture Organization (FAO).²⁷ Similarly misplaced incentives on land – or just plain corruption – have led to deforestation that is often backed by governments anxious for a slice of the revenue.

Then there is the need for a political will in demanding, for example, that governments stop allowing – willingly or otherwise – the large-scale deforestation seen to clear land for cash crops or cattle. Half of deforestation is done for land speculation rather than for the value of the timber. Much of which is burnt rather than felled, which additionally exacerbates natural habitat loss.

The most cited example has always been attempts to stop deforestation in the Amazon through the Investor Policy Dialogue on Deforestation – this has been used as a signal to governments to prioritize these topics. Other issues have had less success, including scaling down vast fleets of Chinese fishing vessels trawling in the Pacific, or broken solar panels discarded on Indian beaches.

Deep-sea mining is another vexed issue, since plans to dredge the seabed for valuable minerals target sites in international waters that lie outside governmental jurisdiction. In July 2023, 36 financial institutions – representing more than EUR 3.3 trillion of assets under management including Robeco – called for a moratorium on permits being issued to mining companies until the environmental consequences can be properly evaluated.

Meanwhile, diplomacy has its limits, since the West has a big problem in trying to lecture emerging markets about sustainability. Much of Europe has already been deforested to pave the way (literally) for the kind of economic growth that emerging markets now seek to emulate. The same is also true in telling developing world governments not to use fossil fuels that have powered western economies for more than 200 years.

You should now be cognizant of the definition and data dilemmas in trying to measure impacts; understand how a lack of research, ratings and internal expertise hamper investors; and see the macro problems with incentives, subsidies and a lack of political will.

Footnotes

²⁶https://www.science.org/doi/10.1126/sciadv.adh2458
²⁷Agrawal et al (2013),Economic contributions of forests. United Nations Forum on forests, Istanbul, 8-19 April 2013

The circular economy aims to replace the currently highly wasteful and destructive linear economic model, which is based on the take-make-waste system of extracting minerals, turning them into manufactured products and then disposing of them at the end of their useful life. Instead, a greater reliance is placed on reusing existing materials in a series of loops.

Much of the concept involves words beginning with ‘re-‘: recycling, redesigning, reusing, refining, refurbishing and repairing – to name the most common descriptors. This has two main objectives. Firstly it makes more efficient use of the Earth’s resources by recycling previously extracted materials, eliminating the need to tap into new ones.

Figure 17: The circular economy principles 

Source: Robeco

Secondly, if used on a large enough scale, it would eliminate billions of tons of waste that ends up in unsustainable landfill, or is dumped in the ocean. Plastic packaging is a particular problem, since 80% of all plastic produced is for single-use. Over one million plastic liquid bottles are made every minute, and 91% of them are never recycled.²⁸

As with the investment solutions to biodiversity loss, much of the benefits of the circular economy are linked to addressing the five drivers, particularly natural resource exploitation. Greater use of the ‘re-‘ words massively reduces the extraction of raw materials and the inherent impact on the environment.

Regarding the land use driver, modern agricultural practices have degraded land and polluted the environment, particularly through the overuse of pesticides for crops and antibiotics in animal feeds, while 70% of all freshwater is used for agriculture. Companies that can offer alternatives to traditional agriculture or irrigation techniques lie at the heart of the circular economy concept.

Wasteful food production is not only a generator of unnecessary landfill, it is also a contributor to climate change. One quarter of greenhouse gas emissions come from the food system itself: agriculture, commercial forestry and other forms of farming directly account for 18.4%, while refrigeration, food processing, packaging, and transport account for the rest. ²⁹

And one flipside of climate change is its effect on the fifth driver of biodiversity loss – invasive species. Former colder areas that are now warming expose countries to the kind of disease-bearing insects such as mosquitos that they can currently avoid. Biting insects not currently seen outside tropical areas are now becoming more common in traditionally colder continents like northern Europe.

Figure 18: The major contributors to climate change

Source: Climate Watch, the World Resources Institute 2020

As with all aspects of protecting nature, this is not just an issue of ecology: it is also a massive economic opportunity estimated to be worth USD 4.5 trillion by 2030.³⁰ Much of this is by developing new means of production, recycling and sharing. New technologies such as developing biodegradable plastics, as well as changing consumer preferences regarding longer-lasting products, are seen as major drivers.

Investing in the circular economy typically targets four clusters with a good stream of companies making products or providing services in: redesigning inputs; enabling technologies; implementing circular use; and looping resources; as shown in the graphic below:

Figure 19: Investment clusters for a circular economy

Source: Robeco 

Product lifetime extension is a particularly attractive prospect, since electronic devices are commonly discarded at the end of their perceived lives, when it would be possible to retain up to 90% of the product’s value by using a more modular and recyclable design. Improving technology for battery life extension is a potential huge market in its own right.  

The move towards a circular economy is becoming more urgent as increasing urbanization, a rising hyper-consuming middle class and a global population approaching 10 billion create unsustainable pressure on resources and waste management. At current production levels, the world needs 1.7 Earths to sustain consumption, rising to three Earths by 2050.

But there is still a long way to go: according to the EU’s Circularity Gap Report 2020, only 9% of the current world economy is circular.³¹ To try to speed things up, in March 2022 the bloc launched its Circular Economy Action Plan to align with its net-zero goal under the wider European Green Deal. The proposals include boosting sustainable products, empowering consumers for the green transition, a review of construction regulation, and a strategy for more sustainable textiles. ³²

In November 2022, the European Commission proposed new EU-wide rules on packaging. These include measures to improve packaging design to promote their reuse and recycling, along with a clear transition to bio-based, biodegradable, and compostable plastics. The European Parliament also called for tighter recycling rules and binding 2030 targets for materials use and consumption in line with its Biodiversity Strategy (see Chapter 3).

You should now see the need to replace the take-make-dispose linear economic system; be able to explain how addressing land use and resource exploitation can cut waste; and outline the investment opportunities in new means of production and recycling.

Footnotes

²⁸ UNEP Food Waste Index Report 2021 | UNEP - UN Environment Programme
²⁹ Emissions by sector - Our World in Data
³⁰ Accenture, ‘Waste to Wealth: Creating advantage in a circular economy’, 2015.
³¹ Circularity Gap Report | European Circular Economy Stakeholder Platform (europa.eu)
³² How the EU wants to achieve a circular economy by 2050 | News | European Parliament (europa.eu)

All companies negatively impact biodiversity in some way, just as they all impact climate change to some degree through their emissions. The focus of both biodiversity investing and wider sustainable investing is to reduce these impacts, while accepting that some negativity will always remain – there is no silver bullet.

The focus for biodiversity investing has therefore been to identify the companies at the forefront of this transition to a more nature-positive economy. Here are some examples of companies that are taking a leading role in trying to lower their impacts and facilitate this transition through their corporative activities, products and services.

Making corporate production systems more sustainable is essential to reduce negative impacts on biodiversity and move to a circular economy. Food giant Nestlé has been conducting life cycle assessments (LCA) for the last ten years to analyze the environmental performance of its major product categories and make changes where necessary. ³³

To do this, Nestlé uses the Eco-design for Sustainable Product Development and Introduction (EcodEx) tool. This allows the entire life cycle of products to be assessed, using five environmental indicators: global warming potential (greenhouse gas emissions); non-renewable energy and minerals use; land use; freshwater consumption; and the impact on the ecosphere.

Since the company is heavily reliant on nature as a major food and drinks producer, the use of two biodiversity indicators – land use and impact on the ecosphere – is key to assessing overall impact of its extractive processes. In its first four years of use, Nestlé had evaluated and addressed the sustainability hotspots for 22 products categories – including 7,000 projects and 20,600 scenarios.³⁴

In one practical example, the LCA was used to study coffee production, which can have a large environmental impact due to water use and packaging. The analysis sought to improve the energy efficiency of harvesting machines, use more renewable energy, support coffee bean farmers in adopting climate-smart agricultural practices, and using more recycled plastic. This led to reducing the carbon footprint of a cup of its coffee by 28% by 2020. ³⁵

Aquaculture can take the pressure off the oceans by providing high-protein food in a more sustainable environment. Leroy is a Norwegian seafood business whose core operating activities include salmon and trout farming, whitefish fishing, and the distribution of seafood. The company operates fishing vessels and farms along the Norwegian coast along with packaging plants in the Nordics and southern Europe. Some 69% of its salmon farms are certified by the Aquaculture Stewardship Council, and the company is working towards 100%. ³⁶

Farmed Atlantic salmon is a resource-efficient food source with a strong food conversion ratio – the amount of feed it takes to produce one kilogram of the meat contained in the end-product. For farmed Atlantic salmon this is 1.3-1.5 kg, one of the lowest ratios for all meat production, compared with 1.8-2.0 kg for chickens, 2.8-5.1 kg for pigs, and the high 6-10 kg for beef.

Figure 20: Food conversion ratios

 Source: Robeco, UN 

The move toward organic food is not just good for you – as seen in Chapter 5, it’s also a USD 350 billion business growing at 30% a year. One company at the heart of it is Sprouts Farmers Market, which operates healthy grocery stores in the US and is a leader in reducing the biodiversity impact of food systems. The company focuses on sustainably sourced products and reducing food waste.  

Sustainable products accounted for 44% of sales in 2021, more than half of which were organic. Some 60% of waste was diverted from landfill, and 78% of food waste was recovered. The company planned to open another 30 stores in 2023 as the overall organic market grows. The market is still being driven by Millennials willing to pay a premium for healthy and quality food.  

Consumers of organic food consumers tend to be younger and have children in the household (Gen Z), offering a strong income stream for decades to come. Analysts expect this next generation of consumers to display ‘ecologically conscious behaviors’ that will continue to benefit not only organic food, but products such as sustainable furniture and recycled clothing. 

Biotechnology is a powerful tool for making the food system more efficient and less reliant on pesticides. Novozymes researches, produces and sells enzymes for agricultural, food and industrial use through its worldwide physical and digital distribution network. The Danish company works within three main segments creating enzymes that service the food and animal feed markets.

Enzyme technologies are derived from naturally occurring microbes such as bacteria and fungi and can be used to replace chemical fertilizers. Microbial biocontrol solutions also provide powerful protection against insects and disease, making them a solution for the fifth driver of biodiversity loss, invasive species.

Another company using biotechnology is the Dutch firm DSM, which makes dietary supplements, early life nutrition, and food efficiency-enhancing products. For example, its Veramaris natural algal oil is an alternative to salmon feed that saves 60 tons of wild fish from needing to be caught simply to feed other fish. DSM also makes a suite of meat alternative solutions that can enhance the flavor of vegetable-based proteins and replicate the meaty textures of plant-based alternatives.

Figure 21: Biotech solutions for the food industry

Source: DSM, Robeco

Emissions must be cut to tackle both climate change and its effect on biodiversity. It’s fairly easy to measure Scope 1 emissions, as these are produced directly by a company, or the Scope 2 emissions generated by the energy used to create the product. It is far harder though to measure Scope 3 emissions which are created across the entire value chain, from the original sourcing of raw materials (upstream), to the lifetime use of the product by the consumer (downstream).

Figure 22: Scope 1, 2 & 3 emissions

Source: Robeco

This is a particular issue for Unilever, one of the world’s largest producers of household goods, foodstuffs and beverages. Its Scope 3 upstream emissions stem in large part from the growing and sourcing of ingredients and raw materials. Downstream emissions accrue mostly from the end use of the products, from boiling the kettle to make a cup of tea, from the transportation of products into and out of supermarkets, and finally from the waste generated at the end of the product’s life.

In 2010, Unilever began to estimate upstream and downstream emissions, using both internal and external sources. The company took a representative sample of 3,000 products from across 14 countries and 12 segments accounting for 60-70% of sales volume. For each product, emissions were estimated for each of the nine phases of the life cycle, from the ingredients and packaging to use by the consumer.

The emissions sample was then scaled to the country and then ultimately to the overall company level. Unilever wanted to use the results to identify high emission areas that need to be addressed through better sourcing, use of technology, packaging improvements or other means of cutting emissions.

However, the difficulty in gaining accurate data from so many products with so many unknowns proved too great, and Unilever dropped Scope 3 as a target in 2020, though it continues to try gather data for it. One of the major sources of Scope 3 is the showers and baths that people take while using Unilever’s products, and there is no way to accurately know the level of this.

Palm oil is one of our most essential consumer goods: it’s an ingredient in almost half of all supermarket products, from chocolate and foodstuffs to detergents and toothpaste. Yet its production presents many sustainability challenges, led by deforestation that takes place to clear virgin forest for new palm trees. The industry faces additional ESG problems that include poor labor standards and high levels of carbon emissions. This is where engagement can make a difference. ³⁷

In 2019, Robeco stepped up engagement in palm oil, requiring all investee companies to become members of the Roundtable of Sustainable Palm Oil (RSPO) and to have at least 20% of their plantations already certified by this trade body, with a clear roadmap to moving to 100%. In 2022, the threshold for RSPO certification was raised to 50%, with a clear pathway to having at least 80% certification by the end of 2024. Those who fail to meet the standard face exclusion.

Engagement has also taken place with governments to avert deforestation in Brazil and Indonesia, working collectively as part of the Investor Policy Dialogue on Deforestation (IPDD) to highlight policy gaps. Talks took place with the Brazilian government in 2020 to stop destruction of the Amazon rainforest, and with Indonesia in 2022, partly linked to palm oil.

Although engagement is usually done with companies, as the owners of sovereign bonds, asset managers can also take this approach with governments. Those who fail to respond effectively also risk exclusion from bond portfolios. We also need clear regulation and a level playing field to facilitate the transition from deforestation to reforestation.

You should now understand how companies are using eco-tools to cut their impacts; see why biotechnology offers alternatives to fishing and pesticides; and be able to explain how using data to plot emissions and engagement to stop deforestation.

Footnotes

³³
https://www.nestle.com/sites/default/files/2020-01/nestle-answers-cdp-climate-2019.pdf
³⁴
https://www.adm-global.org/productionsupporttools/Ecodesign_EcodEX.html
³⁵
https://nestle-nespresso.com/news/Life-Cycle-Analysis-Reducing-our-footprint
³⁶
https://www.leroyseafood.com/en/sustainability/sustainability-library-2022/certifications-and-licenses/#anchor-section-certifications-farming
³⁷ Our approach to sustainable investing in palm oil (robeco.com)

1. Biodiversity is the sum of all living things on Earth. The five main drivers of biodiversity loss are land and sea use, climate change, pollution, direct exploitation of natural resources, and invasive species. ‘Bending the curve’ is necessary to stall and reverse this loss.
   
   

2. Half the world’s economic output is highly dependent on nature, making it a vital issue for investors. Heatmap assessments can identify the most vulnerable assets under management. Aside from the risks, it’s also a USD 10 trillion investment opportunity in the businesses that offer solutions.
   
   

3. Global regulation is being led by the Kunming-Montreal Framework which seeks to stop nature loss by 2030. The EU is focusing its efforts on a Biodiversity Strategy and the wider European Green Deal. Central banks, regulators and financial supervisors are all playing a role in setting legal frameworks.
   
   

4. Investors are using collaborations to pool their resources, and will use the Taskforce on Nature-related Financial Disclosures to quantify their efforts from 2023. Investment action is taking place through the Finance for Biodiversity Pledge and engagement is being done via Nature Action 100.
   
   

5. Investment solutions are targeting the transition of industries that impact the five drivers, such as through more efficient land use, and by addressing climate change with greater investment in renewables. Opportunities abound in sectors from organic food and forestry to biotechnology.
   
   

6. There are still many challenges, however. Investors face a data dilemma in trying to measure impacts, while a lack of research, biodiversity ratings and internal expertise hampers efforts. Then there are macro problems with incentives, poorly allocated subsidies and a lack of political will.
   
   

7. One answer lies in the circular economy which by definition is nature positive. It can certainly play a role in addressing drivers such as wasteful resource exploitation by replacing the take-make-dispose linear system. Developing new means of production and recycling is a USD 4.5 trillion market.
   
   

8. Finally, we have case studies to show how biodiversity investing is already working. Giant consumer companies are using eco-tools to cut their impacts, while biotechnology offers alternatives to pesticides. Data systems can plot emissions while engagement is helping to stop deforestation.

If you are clear on all these points, you are ready to take the test.