A six-pillar approach to protecting nature to protect investments

“Biodiversity really needs its own Paris agreement.” 

It is essential for investors to consider the critical role nature plays in underpinning the healthy functioning of our economy, says the global head of sustainability at BNP Paribas Asset Management.

In a keynote at this month’s RI Australia conference, run by Responsible Investment Association Australasia, Jane Ambachtsheer, pointed out the close links between biodiversity and economic activity.

She shared that the total annual value of global ecosystem services is estimated to be $125 trillion, which makes biodiversity a critical topic for investors and asset managers to understand. 

“If we take the example of pollinating insects and in particular bees, whose pollination provides 5 to 8 per cent of global agricultural production, their disappearance could result in financial losses of up to 200 billion euros (A$314 billion) a year,” Ambachtsheer said.

“The good news is that 2021 is turning out to be the year of biodiversity. We’ve got The Convention on Biological Diversity (COP-15) happening this year, where we can endorse ambitious goals to preserve and restore biodiversity. 

“Biodiversity really needs its own Paris agreement.” 

With biodiversity already impacting investors and their investments, Ambachtsheer and her team created a six-pillar approach to biodiversity and investing.  

1. Integrate and understand ESG  

Much like many other asset management companies, BNP Paribas has its own ESG scoring system, but Ambachtsheer was quick to note that it didn’t have as many biodiversity metrics to it as she would like. 

“We’ve done a few things to really build out our knowledge and capacity around understanding biodiversity loss,” she said. 

“We started by using the Encore Dependency Tool, which is available to everyone, to look at all of our assets under management.” 

Ambachtsheer explained that the tool allowed them to see which ecosystems the assets were dependent on. They looked from the perspective of water, flood, storm protection and climate regulation and mapped everything out — with the findings to be released in a white paper next month. 

“We recently launched specific programs to understand our water and deforestation footprints and have been running integration programs with our portfolio managers to understand where we have water intensive assets,” she said. 

“Once identified it gives a great opportunity to ask if you’re comfortable with how the company is tackling the issues and it also flags companies to engage with.”

2. Be an advocate for stewardship 

Ambachtsheer and her team have been making good progress in engaging companies on investment topics like soy, beef, palm oil and pesticide use but she said there was an opportunity for greater industry-wide engagement. 

“Similar to some of the work that we’ve seen on the climate side we could be working collaboratively through the Principles for Responsible Investment (PRI) to create more structure around collaborative engagement opportunities, linked to biodiversity,” she said. 

“We’re also thinking about how we can tackle biodiversity. From a corporate lobbying perspective.

“I think that there’s an opportunity for us, and collaboratively for the investment community, to play an active role in terms of public policy engagement, particularly leading up to Cop-15 where we can be calling for an ambitious outcome in the context of biodiversity.” 

3. Set and keep responsible business expectations

Setting ambitious, and transparent, policies and targets is part of BNP’s approach to responsible business. 

“I think that really structured activity around articulating our expectations is a really important role for financial institutions to play,” Ambachtsheer said. 

An example of that in action are the well developed policies BNP has in place in the food and agricultural sector. 

“BNP recently amended its agricultural sector policy to really tighten restrictions around deforestation and land clearance in the Amazon and the Cerrado regions of Brazil. Two of the most biodiverse regions on Earth,” Ambachtsheer said. 

4. Use research to create a forward-looking perspective 

Increasing the understanding of biodiversity from an investment perspective is a key enabler to progress and an area Ambachtsheer is constantly looking at.

“One of the things that we’re doing is publishing white papers and other pieces of information to share some of the research we’ve been working on,” she said.

“We really want to help people understand how you can dig into this issue because I know that it’s one that’s less well understood for many investors.” 

5. Create sustainable investment solutions

She said that investors needed to think about how they could invest in ways that allocate capital to restoring the ecosystem from both a listed and unlisted perspective. 

“We’ll be coming to market with a sustainable plus range in the next few weeks and share some of the different opportunities that we think are really exciting,” Ambachtsheer said. 

6. Walk the talk 

Ambachtsheer also talked about the importance of companies showing their legitimacy in calling for more progress from policymakers by doing the right thing themselves. 

“This year we’re bringing in a scientist to do some training with our staff, we have a zero waste target for our own operations as well as an emissions reduction target,” she said.

“There are lots of opportunities here for investors to really identify how biodiversity loss presents a risk, how biodiversity and ecosystem restoration presents an opportunity and really dig into that further from an investment perspective.”