Why is biodiversity climbing up the investment agenda? Here’s what you need to know

After the surge in energy prices in 2022, the warm start to 2023 could be something of a relief. That said, the warmer temperatures may not be so surprising when you consider Euronews reveals that the UK recorded the warmest year ever in 2022. 

According to the article, the average temperature in Britain throughout the year was more than 10°C for the first time ever. While the warmer weather might be welcomed by your bank account given skyrocketing energy prices, it again reminds us that we are living at a time where the effects of climate change are becoming ever more apparent.

If this is something you are concerned about, you may have invested in Environmental, Social and Governance (ESG) funds. These look to expose your cash to potential growth while investing in companies that are more environmentally or socially responsible.

While investing in environmentally responsible funds is commonplace now, there is another area of investing that could become increasingly important when it comes to tackling climate change – investments that recognise the value of biodiversity, aim to preserve it and works to halt its decline.

Read on to discover why the issue of biodiversity is moving up the investment agenda, and how Ardent may be able to help if it’s something you are interested in.

Climate change and biodiversity are different but linked

If you look at the World Wildlife Fund (WWF) website, you will see that it describes biodiversity as the many different kinds of life in one area, such as animals, plants, fungi and even bacteria. The climate, on the other hand, is the long-term pattern of weather in a particular area.

According to World Economic Forum, an estimated £36 trillion of economic value is “moderately or highly dependent” on the natural world. It highlights that many companies around the world profit from the use of natural resources, including water, land and forests, and even pollination and flood control.

While biodiversity supports nature, which in turn supports business, it also provides humans with the resources to survive. Yet the WWF reveals that the populations of mammals, fish, birds, reptiles and amphibians have dropped by an average 69% since 1970. Furthermore, even though biodiversity and the climate are different, they are also interlinked. 

Research by the European Union shows the connection means that the demise of the natural world could result in the effects of climate change being felt more severely across the world. This is because climate change creates extreme weather conditions that result in droughts, floods and landslides, which then have a negative effect on nature and biodiversity. 

The destruction of ecosystems and biodiversity then undermines nature’s ability to protect against the effects of climate change, which could accelerate its effects on the planet. It’s not all doom and gloom though, research suggests. 

Biodiversity loss is climbing up the investment agenda

According to abrdn, biodiversity is becoming increasingly important for asset managers and investors, who are increasingly interested in how their investments affect the natural world. One reason for this could be increasing awareness of environmental issues due to more media exposure.

As headlines continue to highlight the damage caused to wildlife and aquatic life by discarded plastics, pollution and deforestation, so the issue of protecting biodiversity has moved up the investment agenda.

This has dovetailed into political events too. At November 2022’s United Nations Climate Change Conference (COP 27) at Sharm El-Sheikh, world leaders declared an “urgent need” to recognise the interlinked global crisis of climate change and biodiversity loss. 

This bodes well for the natural world, although Morningstar reports that it’s rare to find investment funds that are specifically targeted to biodiversity. The reason for this, it explains, is that asset managers tend to include biodiversity as part of their approach to fighting climate change, as opposed to concentrating on it in its own right.

While this may be true, there are still options you may want to consider.

Get in touch

As a practice, Ardent is committed to the principle that investing can be a force for good, which is why we have won prestigious industry awards for our work recommending ESG funds. It is also why we work with our preferred London-based fund manager, EQ Investors, a company that is staff-owned and has focused on sustainable investing since 2008. 

Part of its remit is to promote the protection of biodiversity and halt its destruction. One way it does this is to select investment funds that invest in companies providing novel solutions to reduce biodiversity loss or support its restoration.

This includes investing in companies that:

  • Produce safe, alternative, bio-based and degradable chemicals and ingredients
  • Businesses involved in sustainable natural forest management and conservation
  • Companies that avoid the biodiversity loss associated with intensive animal farming
  • Avoid new material production and the associated impact on biodiversity.

If you would like to discuss ESG funds, or how we may be able to help you invest in a way that helps protect biodiversity, we would be happy to chat. Please contact us on hello@ardentuk.com or call 01904 655 330. 

As an award-winning financial advice company that was a 2022 VouchedFor Top Rated firm, you can be sure that we’re a bona fide company providing excellent advice and high quality service.

Please note

This blog is for general information only and does not constitute advice. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change. 

The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Get in touch

By talking about your current situation and listening to your aims, we create a personalised plan that will put you on a path to achieving your aspirations.

More articles

22 Mar 2023 News

3 ways cashflow modelling can help your clients plan for a better future

Read more

22 Mar 2023 News

3 powerful reasons holistic financial advice is vital to a wealth strategy

Read more