Given one of the themes for World Investor Week 2023, in association with with the FMA, is ethical investing, we wanted to share an article from the latest edition of our flagship publication for clients, News & Views.
Biodiversity is fundamental to a good quality of life
Biodiversity describes the variety of life that exists on Earth including plants, animals, bacteria and fungi. The ecosystems they form are the foundation of all civilisation, providing clean water and air, healthy soils and food.
They also provide us with important resources and materials for medicines and other purposes.
Biodiversity loss is one of the top global risks
The World Economic Forum conducts an annual assessment of global risks based on the perceptions of businesses, governments and civil society. Biodiversity loss and ecosystem collapse was one of the top five global risks identified in the 2023 report.
Although biodiversity loss hasn’t been as topical as climate change, the need to manage it is growing in importance. This shouldn’t come as a surprise with biodiversity loss occurring at unprecedented rates. The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) found that the current global rate of species extinction is tens, if not hundreds, of times higher than the average rate over the past 10 million years.
It’s also accelerating, with 83% of wild animals already lost and over half of all plants.
What is causing biodiversity loss?
The IPBES performs the most comprehensive global biodiversity assessment known to date. It says the following drivers explain more than 90% of nature loss over the past fifty years:
• Land and sea use change
• Natural resource use and exploitation
• Climate change
• Pollution
• Invasive species
If action isn’t taken to abate the speed at which these factors are causing change, there could be catastrophic consequences.
Why is biodiversity loss a problem?
The World Economic Forum estimates that more than half of global economic output (approximately US$44 trillion) is moderately or highly dependent on nature.
The Sustainable Business Council estimates that 70% of New Zealand’s exports depend on natural resources.
Three business sectors have been identified as the most highly dependent on nature and therefore the most vulnerable to biodiversity loss – agriculture, construction and food and beverages.
These sectors rely directly on resources from forests and oceans, or from healthy ecosystems that provide good soils, water, pollination and a stable climate.
Most other sectors have some reliance on nature through their supply chains.
How is biodiversity loss being managed?
The United Nations Biodiversity Conference (COP15) was held at the end of 2022, with the goal being to agree a global framework designed to halt and reverse the loss of nature. Nearly 200 countries came together and signed the Kunming-Montreal Global Biodiversity Framework.
A few important targets to be achieved by 2030 include the following.
• Conserve and manage 30% of terrestrial, inland water and coastal and marine areas.
• Restore 30% of degraded ecosystems globally (both land and sea).
• Ensure that areas under agriculture, aquaculture, fisheries and forestry are managed in a sustainable way.
Before the next United Nations Biodiversity Conference in 2024 (COP16), all countries need to have National Biodiversity Strategies and Action Plans, as well as National Biodiversity Finance Strategies.
There are two parts to New Zealand’s biodiversity strategy – Te Mana o te Taiao (Aotearoa New Zealand Biodiversity Strategy) and developing the National Policy Statement for Indigenous Biodiversity.
Te Mana o te Taiao sets a path for protecting, restoring and enabling the sustainable use of biodiversity in New Zealand. The National Policy Statement is being developed to ensure the approaches taken by local authorities are consistent with respect to protecting biodiversity.
Many initiatives have been established in other countries to mitigate biodiversity loss, including the following examples.
• The Taskforce on Nature-related Financial Disclosures (TNFD) has a framework to help organisations disclose information about nature-related dependencies, impacts, risks and opportunities.
• In May 2023, the European Parliament approved a deforestation law prohibiting the importation of coffee, beef, soy and other commodities into Europe if the products are linked to the destruction of forests.
Ultimately, these reporting requirements and regulation changes will inform investors about where to allocate capital to drive the transition to a sustainable economy.
This is an excerpt of an article published in the latest edition of our flagship publication for clients only, News & Views. Craigs Investment Partners clients can read News & Views, including the full version of this article by logging in to the client portal.
Market Insights enewsletter
Keep up to date with our fortnightly Market Insights enewsletter. Our research team provide timely and regular commentary and analysis on market developments, understanding investment jargon, and the impact of current events.
Vanessa Stevens
Senior Sustainability Analyst
Market Insights enewsletter
Keep up to date with our fortnightly Market Insights enewsletter. Our research team provide timely and regular commentary and analysis on market developments, understanding investment jargon, and the impact of current events.