Could finance be the saviour of biodiversity?

Audrey BOREL

As a financial stakeholder, we have a big part to play in ensuring capital is channelled towards more virtuous solutions.

Audrey BOREL
Audrey BOREL

Heading for a sixth mass extinction

Over the last 500 million years, life on Earth has come within a whisker of being wiped out five times. The most famous extinction event saw the dinosaurs disappear some 65 million years ago. Studies today show that species are dying out at a faster and faster rate, with some scientists even describing the phenomenon as a sixth mass extinction. According to a 2019 report by IPBES, the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services, species are disappearing at a speed between 100 and 1,000 times faster than the natural extinction rate over the last two centuries. But while previous extinctions have been caused by natural events, this time around the culprit is humanity.

Global demographic and economic growth are driving demand, putting unprecedented pressure on natural resources sourced from wild and domesticated species.

And it’s not just the environment that is at stake – a large part of our economy is reliant on natural resources. For example, 50% of global GDP is directly dependent on healthy natural ecosystems (World Economic Forum report, Jan 2020).

How can the world of finance help?

Spurred on by the European Recovery Plan, a range of different financial solutions have been suggested in recent years to address climate issues, but there is still little in the way of support for companies working to protect biodiversity.

Indices are a powerful tool for investors looking to align their investments with their values, enabling them to systematically and dynamically take into account environmental, social, and governance criteria while investing in a particular target area.

Silex has recently co-developed a strategy on the theme of terrestrial biodiversity. We have chosen to approach the issue through the prism of the UN Sustainable Development Goals, and specifically Goal 15 which aims to preserve and restore terrestrial ecosystems, and Goal 12 which aims to ensure sustainable consumption and production patterns. The index is made up of 40 eurozone equities, all selected for their positive contribution to terrestrial biodiversity and reviewed quarterly.

Standout performers on biodiversity include several luxury brands such as the Kering group, which has launched a number of initiatives to promote protection and sustainability of natural resources, vital to its activities. For example, Kering aims to guarantee the supply of sustainably sourced skins, use only cotton certified to environmental standards in its textile products, and ensure compliance with sustainable wood and fibre sourcing policy. The group is committed to having a net positive impact on biodiversity by 2025.

As a financial stakeholder, we have a big part to play in ensuring capital is channelled towards more virtuous solutions. It’s not just about damage limitation, but changing the whole direction of travel. Biodiversity – and all of our futures – depend on it!

Source: Monaco for Finance

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