Biodiversity, 10,000 billion opportunities
By Luc Olivier, Fund Manager, La Financière de l’Echiquier (LFDE) | November 2024
As COP 16 draws to a close in Colombia, the issue of financing biodiversity preservation is in the spotlight. The urgency is the need to find $200 billion[1] each year between now and 2030 to protect nature, as set out in target 19 of the Kunming-Montreal Accord adopted at the previous COP.
It is an urgent challenge. And also a global one. All indicators measuring biodiversity on a global scale show a decline. The challenge is especially critical, as over 50% of global GDP depends on biodiversity.[2] Private funding will need to be mobilised to a greater extent to protect and restore biodiversity. However, research by Morningstar[3] shows that there are only 34 funds dedicated to biodiversity. They are all European, with the only dedicated fund in the United States having closed in February 2024, and their assets add up to a total of $3.7 billion – but they have been seeing net outflows for the first time since the start of this year.
Channelling funding towards business models that support biodiversity is a priority. One lever is impact investing. As pioneers in listed impact investing in France, we are convinced of its importance in attracting capital to companies committed to protecting and restoring our ecosystem.
Given the scale of the challenges, we believe that all sectors of the economy need to be on board. At the top of the list is agriculture, the second-largest source of CO2 emissions and the main factor in environmental degradation. We are looking at ambitious players like DSM-Firmenich, a specialist in health, nutrition and beauty ingredients. This Swiss company, which is very aware of the challenges of climate change and biodiversity, has developed a natural solution, Bovear, which drastically reduces methane emissions from ruminants.
Another global challenge and priority sector is water, demand for which is expected to increase by 55% by 2050, according to the World Economic Forum. Yet it is estimated that only 11% of water is recycled, with wide disparities around the world. At its Water Tech Day in October, Veolia announced its intention to increase revenue from its water recycling and treatment business by 50% by 2030.[4]
While the global ambition to achieve “nature positive” status by 2030 could generate more than $10 trillion in opportunities,[5] these examples demonstrate the ability of companies to seize business opportunities while creating positive impact. Their innovative solutions offer opportunities that we seek to capture through our Echiquier Climate & Biodiversity Impact Europe and Tocqueville Biodiversity SRI strategies.
The opinions expressed are those of the manager. LFDE cannot be held liable in any way whatsoever. Investors should note that their investment in the Echiquier Climate & Biodiversity Impact Europe and Tocqueville Biodiversity ISR funds does not generate a direct impact on the environment or society, but that the funds seek to invest in companies that meet the specific criteria set out in the management strategy. The securities and sectors mentioned above are given by way of example. Neither their presence in the portfolio nor their performance are guaranteed.
[1] Novethic, 28.10.2024
[2] Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy, World Economic Forum, 2020
[3] The Landscape of Biodiversity and Natural Capital Funds, 10.2024
[4] Morgan Stanley, 17.10.2024
[5] How to unlock $10.1 trillion from the nature-positive transition, World Economic Forum, 07.2024