From Morningstar: 2024-11-15 05:08:49

The UN Biodiversity Summit, COP16, saw 119 nations commit to binding biodiversity targets but ended with disputes over funding for damaged ecosystems. Despite the urgent need for action, biodiversity funds have doubled in size to $3.7 billion, a fraction of the $520 billion climate fund market. Morningstar notes a lack of investment progress due to data availability challenges and lack of US interest.

Leading biodiversity funds include the Robeco Biodiversity Equities Fund and the BNP Paribas Easy ESG Eurozone Biodiversity Leaders PAB Fund. However, obstacles such as lack of data and US interest hinder biodiversity funds from accessing needed capital. Legislative change is seen as crucial to boost investor engagement in preserving biodiversity.

While COP16 did recognize the key role of Indigenous Peoples and people of African descent in biodiversity conservation, it ended on a negative note with rich countries blocking a proposal to aid poorer nations in restoring damaged environments. The event saw a record number of industry delegates but lacked significant progress due to competing interests and a lack of regulatory response.

Biodiversity funds face challenges in assessing the materiality of natural resources they depend on, which are often treated as free. Unlike climate change, biodiversity lacks the same regulatory response and political momentum to drive progress. Destruction of biodiversity could have catastrophic consequences for essential services that humans depend on for survival.

Despite the noise around COP16, the main issue remains the continued destruction of ecosystems leading to a 70% decline in wildlife populations in the last 50 years. This decline threatens essential services such as clean water and climate regulation, which support global food production and business resilience. The consequences of degrading nature could be catastrophic for society and the economy. Biodiversity funds are on the rise, with investor interest in environmental outcomes and alpha potential. Companies offering eco-friendly products will benefit from the need to address the biodiversity crisis. Despite being a top investor risk, progress in factoring biodiversity into investment decisions is slow. World Economic Forum report highlights biodiversity risks. No securities mentioned in the article are owned by the authors.



Read more at Morningstar: Slow Progress on Biodiversity But Investors are…