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Biodiversity: Is it time to turn scientists into financiers?

This is indeed a critical and noble objective. But as the conference seeks to emulate the momentum created by the Paris Climate Agreement on temperature targets, it must also learn from the experiences and ensure there is a clear roadmap to understand objectives and skills needed to create biodiversity funds and ultimately invest for a better future.

One of the key first steps the industry needs to take is understanding the complexity of biodiversity.

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While the issue is widely understood as interrelated with climate, its impact can be far-reaching with consequences for communities, markets and governments.

Not only does biodiversity refer to species, it also covers ecosystems such as forests, coral reefs, and much more which makes it a complicated field to navigate.

Investors are currently looking at biodiversity from two points of view: the first is how to raise capital to put towards nature-based economic opportunities; the other is analysing how portfolio companies are contributing to, or vulnerable to, biodiversity loss.

This is no different to climate investing; both are ultimately looked at through a binary good/bad progressive lens.

While this is usually more obvious in climate funds, it is harder to see the difference in biodiversity funds.

The biodiversity investing landscape is expanding, with companies such as Fidelity, Hermes, Lombard Odier, Pictet, and AXA all launching funds or supporting initiatives such as The Natural Capital Investment Alliance.

However, it is worth remembering that not all biodiversity funds are created equally, especially if you want to invest in companies that are really focusing on doing good, rather than those that are not doing harm.

It is important for investors to understand the consequences of action as well as inaction in the context of the biodiversity challenge.

The natural capital investing world should also make sure to avoid the difficulties that the ESG brand found itself in by meaning many different things to many different people all at the same time.

The creation of funds such as the government’s Big Nature Impact Fund are important steps in the right direction, as it helps to shift focus onto direct investment for change.

But, in order for the funds to be properly managed, the investment industry needs to identify and develop the specialist skills needed to drive change through biodiversity investing. 

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As biodiversity conversations move from niche to mainstream and many of us are becoming more familiar with language such as natural impact, biodiversity loss and physical risk, it is clear that there is an opportunity to provide specialised education around the basic science of biodiversity.

Traditionally, the investment profession and science have been intrinsically linked, and biodiversity is an opportunity to strengthen that bond and for each to learn from the other.

The question for biodiversity should be whether we need to turn scientists into financiers, financiers into scientists, or both?

We are not expecting a swathe of scientists to become investment professionals or vice versa, but there is an opportunity for those who are interested in the climate and biodiversity preservation and are interested in finance to carve out a niche for themselves and really lead the charge.

While we are starting to talk, think and invest more into biodiversity we need to realise that the time for change is now.

As the race to net zero has shown, there is a cost of inaction as deficits increase and timelines shrink.

The sooner we can see the relationship between all of our activities, the faster we will be able to contribute to protecting and building a more sustainable future.

Loss of biodiversity is now considered as serious as climate change.

It is time for investors to play a role in conserving it and to start building the necessary skills.

Will Goodhart is chief executive of CFA UK

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