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The complex interconnections of our natural world are under threat as climate change accelerates and ecosystems start to collapse. It will take a concerted effort by governments, companies and investors to change the current course of direction, limit losses in biodiversity and adopt a more holistic approach to tackling climate change.
“Biodiversity is inextricably interlinked with tackling climate change,” says Ian Chesham, Director in the Charities Team at Barclays Private Bank. “It’s all part of the same crisis. They are different sides of the same coin; you can’t solve one without the other.”
Economic impacts
The loss of biodiversity on our planet also has real-world economic impacts. Global Environmental Change statistics estimates that between 1997 and 2011 declines in the world’s biodiversity resulted in losses of up to $20tn per year.
Until recently, asset managers and asset owners have been focusing on fossil fuel companies – either through divestment or stewardship – as being the key players in addressing climate change and furthering net-zero goals. “That was definitely the right place to start,” says Chesham. “But we need to think broader now in terms of how we can strengthen ecosystems and biodiversity. The solutions are linked, as are the problems. By focusing on one thing, you’re never going to achieve your goals.”
Chesham says that from an asset manager’s point of view, the processes involved in investment in biodiversity selection are similar to those used in more traditional portfolios, with the same principles of ethical and environmental impact screening applied. “Biodiversity is the next consideration across the industry,” he says.
However, incorporating biodiversity data is still in the early stages and metrics by which to measure performance are only just coming into play. The Intergovernmental Science Policy Platform on Biodiversity and Ecosystem Services criteria is a good starting point, says Chesham. The international body has identified five key drivers of biodiversity loss, namely: land and sea changes; direct exploitation of organisms such as by overfishing and deforestation; climate change; pollution; and invasive species. Within this context, a company’s commitment to biodiversity sustainability can be better evaluated.
This, coupled with the Task Force for Climate-related Financial Disclosures around governance, strategy, risk impact management, metrics and targets, and International Sustainability Standards Board guidance, provides a framework for better and more consistent analysis.
Chesham explains: “These are comprehensive data sets that companies have to disclose. Asset managers must learn how to interpret them, look at the data and decide the level of confidence in those figures. How are they relevant? What has been addressed and what hasn’t? What is their impact on the wider environment in terms of biodiversity, deforestation, or pollution? Are they taking steps to mitigate that?”
Investment opportunities
The complex nature of the tasks ahead may present challenges but they also present opportunities. “The figures involved in this transition are huge,” says Chesham, citing a United Nations’ report that suggests investments into nature-based solutions have to be more than double their current levels, reaching $384bn a year by 2025 and $674bn by 2050 to deal with the global crises of climate change, biodiversity loss and land degradation. “Governments can’t hit these targets on their own. You need companies for innovation, growth and financing. There’s opportunity in that as you shift global capital towards these causes. There are going to be companies that benefit.”
When it comes to financing, Chesham says it has to be a joined-up approach between government entities, central banks, investors and private companies. “We need entrepreneurs that will come up with new and unique ideas to tackle these challenges. If we shift money to them, then there’s hope we can shift the needle in the direction of sustainability.”
As with any new technology or nascent industrial field large amounts of capital are needed to kick-start innovation. This obviously carries risk for investors which is why many established companies are funding their own research and development in their fields of expertise to seek out unique solutions to environmental issues. Chesham suggests this is a good indicator of a company’s sustainability.
“It’s important to look at companies that are thinking about future growth and revenue, and investing in these types of solutions. There is less risk because generally they will already have good governance, better reporting and stronger liquidity. These are attractive as investments because rather than just relying on what a company has done previously, the mark of a good company is to look at where the next stage of growth is going to come from. Companies which are researching how to tackle losses in biodiversity are thinking about future revenue growth.”
An interview with Ian Chesham director of the charities team at Barclays Private Bank
Fast facts
- Over 65 years’ experience working with charities across the UK
- Barclays Private Bank Wealth Management manages in excess of £183bn in client assets
- Barclays group target is to facilitate $1trn of sustainable and transition financing by end of 2030
What we do
Barclays Private Bank offers investment to charities and not-for-profits. Our team of dedicated sector specialists work with you to understand your requirements and create bespoke solutions that help meet your financial objectives in line with your organisations’ values. Our services include: discretionary portfolio management, with direct access to your portfolio manager; treasury and short-term cash management; liability-matching investment strategies; credit facilities; and access to private asset opportunities.
