Biological diversity, also known as biodiversity, is the variety of life present on Earth or in a specific region and is the backbone of our ecosystems, indeed our very existence on this planet. Biodiversity plays a pivotal role as a carbon sink, purifying the air we breathe and helping to combat global warming. It is the unsung champion behind one-third of the world’s crop production, thanks to pollinators such as birds, bees, and insects.
However, our planet’s biodiversity is at risk. The loss of biodiversity is primarily driven by human activities such as overfishing, deforestation, pollution, and land use changes. These actions have far-reaching consequences, leading to species extinction, declines in populations, reduced genetic diversity, and the disruption of entire ecosystems.
These losses present fresh challenges to human wellbeing and enterprises on the whole. It also jeopardises the achievement of the Sustainable Development Goals, which serve as our roadmap to a sustainable and improved future. Much like climate change, the loss of biodiversity has implications for us all.
Reliance of companies on biodiversity
The interdependencies between various industries and biodiversity are often overlooked. Industries such as beauty, travel and tourism, mining and metals, chemicals, materials, and supply chain have considerable reliance on biodiversity. For instance, the mining industry often operates in areas rich in biodiversity and relies heavily on natural water supplies for essential operations like blasting, drilling, and dust control. Similarly, the beauty industry frequently sources its raw materials, such as plant-derived oils and mineral elements, directly from nature. Therefore, addressing the loss of biodiversity transcends environmental concerns and becomes a business imperative. It is not just about preserving the environment, but also about sustaining the very resources that these industries depend on for their operational existence.
The need for concerted actions
To address the ongoing decline in biodiversity, it is vital for companies, including those in the investment sector, to proactively engage in preserving and restoring nature. The primary objective should be for companies to reduce the impact they have on biodiversity, or at the very least, mitigate their effects. Companies should also strive to compensate for these impacts by aiding in ecosystem recovery and restoration. This could involve adopting biodiversity-friendly standards, setting sourcing criteria, assisting suppliers in compliance, improving process efficiency, advocating for biodiversity-friendly land use and ecosystem restoration efforts. Companies could also participate through nature-positive projects and initiatives such as sustainable forestry and watershed management through green infrastructure.
Healthy ecosystems are fundamental to the global economy, and continuous biodiversity degradation could lead to a destabilisation of financial markets. Nature conservation and restoration are directly aligned with the long-term interests of investors and their investments.
Preparing for reporting on biodiversity loss
The call for businesses to show greater transparency in their activities and to take responsibility for their negative effects on biodiversity is growing. Consequently, structures and reporting guidelines like the Task Force on Nature-Related Financial Disclosures have been established. Their objective is to aid businesses in identifying their biodiversity-associated risks, dependencies, and impact throughout their operations, supply chains, value chains, and portfolios.
Biodiversity fuels economies, and consequently, investments
The importance of biodiversity for both our planet’s health and our economies cannot be overstated. Regulations are instrumental in guiding markets and value chains towards models that protect and restore natural resources, while using them sustainably to promote sustainable growth. We each have a role to play in rectifying human actions that endanger biodiversity and, in turn, fostering resilient and adaptable economies for the future.
Perpetua’s approach to assessing risks to biodiversity
At Perpetua, we believe it is our responsibility, as stewards of our clients’ capital to assess the implications of biodiversity loss on the value of the investments we make on behalf of clients. Biodiversity loss, similar to other environmental issues such as climate change, is an increasingly more important consideration in our investment assessments. The involvement of multiple stakeholders (including government, companies, non-proft organisations and individuals) at various levels is critical. Something as simple as adopting sustainable practices such as reducing waste and investing in biodiversity-friendly projects can have an impact.
We incorporate the potential for biodiversity loss in our engagement strategies with investee companies, particularly those that are most affected by or have the greatest negative impact on biodiversity; specifically those in the fishing, cosmetics, and pharmaceutical industries.
As part of our Responsible Investing (RI) and related ESG policies, we are now incorporating more E-pointed factors that will link our RI policies with Sustainable Development Goals (SDG) priorities that are specifically connected to biodiversity loss. Our overarching objective is to support and influence companies towards nature-positive outcomes.