Investors struggling to identify biodiversity-linked investment opportunities: Credit Suisse

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On the 02/11/21 at 7:36AM

by

Tuba Raqshan

Biodiversity needs to be made more digestible and measurable for investor concerns to translate into investment action, stated Credit Suisse latest report.
Marisa Drew, chief sustainability officer and global head sustainability strategy, advisory and finance, Credit Suisse

Credit Suisse’s survey revealed that while more than half (55%) of asset managers and institutional investors are concerned by biodiversity loss, a majority (72%) have not assessed the impact of their investments on biodiversity. Fewer than one in 10 respondents currently have measurable biodiversity-linked targets, revealed the report titled Unearthing investor action on biodiversity, encompassing 327 respondents from 35 countries, with 53% of asset owner respondents and 47% of asset managers.

Nature is a key contributor to the global economy and accounts for more than $125trn, but time is running out for many ecosystems, said Marisa Drew, chief sustainability officer and global head sustainability strategy, advisory and finance, Credit Suisse. “Up to $967bn will need to be invested every year to reverse the decline in biodiversity by 2030. Investor interest in ESG factors has accelerated, but funding for global biodiversity represents only 0.1% of global GDP. Attracting private capital requires a clear business case for biodiversity and breaking down barriers to investment by creating structured investment opportunities,” said Drew.

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Business risks associated with biodiversity loss/ Source: Credit Suisse

Despite the lag, 67% of the respondents said that they were addressing biodiversity to some extent in their portfolios, mostly by seeking to reduce negative impact primarily through shareholder engagement and exclusions. Meanwhile, two-thirds of the respondents are considering setting measurable biodiversity-linked targets. A vast majority (86%) are very concerned about the impact of biodiversity loss on financial markets, with almost 80% of the respondents identifying reduced productivity of natural systems as the main business risk due to biodiversity loss. Sector-wise, food and beverages were at the highest risk due to biodiversity loss followed by health and consumer goods. More than half (55%) of the respondents believe that the biodiversity issue needs to be addressed in the next 24 months, stated the report.

The report also highlighted that investors are struggling to identify and consider biodiversity-linked investment opportunities, as biodiversity needs to be made more digestible and measurable for investor concerns to translate into investment action. A quarter of the respondents do not know how to take the first steps to make investments supporting diversity, while 32% feel they lack the knowledge to do so. Almost three-quarters (70%) consider a lack of available data as a key barrier to making investment supporting biodiversity while 22% fear investments supporting biodiversity will hurt their financial performance.