ESG: Is Biodiversity is the New Climate Change?

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Fund managers want investors to take biodiversity seriously.

Biodiversity is now in the same league as climate change from an ESG perspective.

AXA Investment Managers, BNP Paribas Asset Management, and Sycomore Asset Management want investors to focus on biodiversity preservation.

According to reports, the firms are working together to locate a data company to help measure the impact of companies on biodiversity. While many tools have emerged on the ESG front, they say the primary focus is on climate change.

“Biodiversity plays a vital role, and its collapse would jeopardize the future of humanity,” the asset managers said in the statement.

Biodiversity, ESG, and Funds

The company issued a joint statement announcing their methodology needs and the pursuit of tools to measure biodiversity impact.

“Today, AXA IM, BNP Paribas AM, Mirova, and Sycomore AM are joining forces in order to raise awareness in the financial community and develop the necessary tools for investors to respond to this threat,” the statement read.

The managers are seeking a methodology that embraces the following principles.

  • Impact measurement: the methodology must provide a “physical” indicator (e.g.: km2 mean species abundance, potentially disappeared fraction of species, etc.)
  • “Lifecycle” approach: the methodology must factor in the entire supply chain from product use to end-of-life.
  • Sector estimates: sector assessment grids should make estimates tailored to the specificities of each sector possible.
  • Ease of use, for a variety of purposes: communicating about the impact on biodiversity, providing more extensive reporting, etc.
  • Flexibility and transparency: the methodology must be compatible with the public taxonomies and internal environmental assessment systems already in use, regardless of whether they’re proprietary or open-source.
  • Aggregation and communication: the data provided must simplify the portfolio performance assessment in relation to an index.
  • Application scope: the approach must be applicable to companies active in the main market indices (listed equities and fixed income funds). Ideally, the method should be compatible with other asset classes (listed and unlisted equities, fixed income funds, infrastructure, real estate, etc.).
  • Financial materiality: companies’ levels of exposure to the challenges presented by biodiversity must be assessed in addition to physical impact.

“We hope the tool we develop will be used by all market players, and that it will become a benchmark tool,” the firms said.

Related: ESG: A Firm’s ESG Investments Could Launch a Virtuous Circle – ISS Report

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