MARKETS & INVESTING
The challenge remains how we are to feed 8 billion people today , a number that is set to grow to 10 billion by 2050 , with less arable land available and rapid climate change . Soil health , which is fundamental to farming , remains at risk from biodiversity loss . For example , in the coffee sector , worth nearly $ 100 billion , over 60 % of varieties are at risk of extinction due to deforestation , disease and climate change2 . The economic impact within the soft commodity sector remains heightened , but the misalignment of financial capital to natural resources shows very little signs of abating . Despite biodiversity being a key topic at the Rio Summit over 30 years ago , little progress has been made on closing the gap between finance and nature3 . A paradigm shift is needed where natural assets are framed in a similar manner as other types – financial and human . The role of technology in data collection , storage and analysis will play a key role for companies in quantifying their impact on the natural environment . For example , Tesco is using sound technology to track birdsong and detect insect movements , both used as a proxy for the overall health of farmland . Nestlé has utilised satellite imagery to measure and report on crop coverage and habitat erosion , which will help to both increase yield and make a case for the adoption of more sustainable practices .
THE METHODOLOGY AROUND MEASURING CARBON EMISSIONS
HAS COME A LONG WAY IN RECENT YEARS WITH SCOPE 1 , 2 AND 3 DATA , BUT THERE IS NO
EQUIVALENT FOR BIODIVERSITY .
Investing in biodiversity The aligning of financial capital to nature will need the support of both governments and businesses . The former need to lead in the development of a framework that will lead companies to alter their behaviours via a carrot and stick approach . There is an urgent need to develop coherent metrics and methodologies that businesses can utilise to measure and report their impact . Investors will play a key role in holding corporates to account on how their business models are supporting biodiversity . Engagement remains a key tool for change , and this involves encouraging companies to map their biodiversity risk . The subject remains complex and often company and / or sector specific . Whilst businesses are very good at measuring and mapping business and financial risks , there is a need for management to include biodiversity on the risk register . Financial assets are clearly listed on the balance sheets of corporates , but there is little evidence of natural assets being framed in a similar manner . This needs to change if we are going to manage biodiversity in a sustainable manner , because a business-as-usual scenario will no longer be enough if we are to avoid further unprecedented losses in biodiversity . recent years with scope 1 , 2 and 3 data , but there is no equivalent for biodiversity . Natural capital accounting is still a developing discipline and the lack of standardisation of data on biodiversity remains a key headwind . The dominance of GDP as a measure of economic and financial performance is unlikely to be challenged , but it is imperative that we develop a framework to measure and report on biodiversity to ensure that it becomes an integral part of how we consume and replenish the planet ’ s resources in a sustainable manner .
Aligning financial capital Nature-related risks are often well highlighted by companies , financiers and investors , but are often poorly framed and mispriced . This leads to an inefficient allocation of capital and an overexposure to biodiversity-related risk . Fewer than 1 % of companies representing 85 % of the global market are aligned to SDG 14 ( Life below Water ) and 15 ( Life on Land ) 1 . The global food system is the principal cause of biodiversity loss , with agriculture estimated at nearly 70 % of the projected loss of terrestrial biodiversity .
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1 https :// www . oecd . org / environment / resources / Executive-Summary-ENV-Policy- Paper-no-26-Biodiversity-Natural-Capital-and-the-Economy . pdf 2 https :// www . statista . com / outlook / cmo / hot-drinks / coffee / worldwide 3 https :// unfccc . int / process-and-meetings / the-rio-conventions #:~: text = The % 20 key % 20objectives % 20of % 20the , other % 20utilization % 20of % 20genetic % 20resources .
The views contained herein are not to be taken as advice or recommendation to buy or sell any investment or interest . The value of an investment and the income from it can fall as well as rise , you may not get back the amount originally invested . Past performance should not be seen as a guide to future performance . EdenTree is authorised and regulated by the Financial Conduct Authority and is a member of the Investment Association . Firm Reference Number 527473 .
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