It’s a reality that is no longer up for debate: biodiversity loss represents financial risks that are just as major as those stemming from climate change. That is why BNPP AM has made biodiversity a central pillar of its sustainable investment strategy alongside the energy transition and inclusive growth. But, what can we do today, in concrete terms, to identify and limit the impact on biodiversity from the businesses that we invest in on behalf of our clients?
Within BNP Paribas Asset Management, we are applying ESG criteria to all our investment strategies because we believe that businesses taking these criteria into account will create more value for clients and for society as a whole. So, where does biodiversity come into play? Biodiversity loss presents key physical, systemic and transition risks for investors. That is why we have included the subject in each of the six pillars of our approach to sustainable investments. We believe that having a better understanding of these risks and better quantifying the impact of our portfolios on biodiversity will allow us to make better investment decisions.
“For biodiversity, data and tools for metrics and reporting are essential”
This year, we used the innovative public tool ENCORE from the Natural Capital Finance Alliance in order to better understand and visualize the impact of environmental changes on the economy. By using the data modeling within ENCORE, we have learned that our biggest dependencies are water and ecosystem services that could protect from climate disruption, such as storm protection or erosion control. We have also conducted large-scale measurements of our portfolios’ ecological footprint in order to determine our overall exposure to water and deforestation related risks.
In fact, only 17% of the publicly traded businesses in which we invest disclose data on their exposure to water stress and on the intensity of their water withdrawals. More than a third of our exposure in the sectors presenting the greatest risks of deforestation concern businesses that have weak policies and traceability frameworks, or none at all. That is why we must continue to enter into dialogues with businesses about their policies and supply chain procedures related to deforestation, especially concerning soy, palm oil, cattle, and wood products.
we must continue to enter into dialogues with businesses about their policies and supply chain procedures related to deforestation
We have also made key industry partners, like Iceberg Data Lab or CDP, in order to establish new metrics and coordinated insights on biodiversity. Thanks to these partnerships, we will be publishing the first Biodiversity Footprint for our funds by the end of 2021.
ESG analysis has traditionally focused on carbon, and less on the modification of bee habitats, the destruction of mangroves or the decline of fish populations. However, the loss of natural capital also has a major impact on our investments, especially via business supply chains across all sectors. Confronting these two crises simultaneously is no small task. But do we have a choice?
Imagine, for a moment, the consequences of a lack of water at a large industrial project, or the financial and reputational consequences of a business facing a boycott by consumers who are committed to fighting deforestation. And, what about the effects of a possible savannization of the Amazon for agriculture in South America? Thanks to our work with data and new biodiversity metrics, we can find ways to act and foster investments that take natural capital into account.
“biodiversity is also a key theme for our stewardship activities”
Within BNP Paribas Asset Management, biodiversity is also a key theme for our stewardship activities. We are in dialogue with businesses to stop deforestation and continuing discussions with those that have exposures in areas with water scarcity. We are also working with our portfolio managers on engagement strategies for our funds with a dedicated environmental theme. Through proxy voting, we can support shareholder proposals regarding biodiversity and submit proposals of our own. At the same time, our participation in coalitions and important events like the IUCN represent some of the opportunities we have to engage with public authorities and encourage other international economic actors to lobby for nature. When it comes to preserving biodiversity, just like in many other domains, the financial sector and long-term investors have a role to play in encouraging businesses to reduce their impact and offer more transparency.
Robert-Alexandre Poujade joined BNP Paribas Asset Management in 2011 and has been an ESG Analyst since 2015, focusing on natural capital, blue economy and biodiversity. Robert-Alexandre has been leading BNP Paribas Asset Management thinking on natural capital and is a member of the Zoological Society of London SPOTT Timber, Pulp and Paper Technical Advisory Group. Prior to his current role, he spent four years as a Structurer in the Structured, Guaranteed and Asymmetric Solutions team of BNP Paribas Asset Management. Robert-Alexandre earned a master in Management, majoring in Finance at ESCP Europe - Business School in 2010.
The IUCN Congress, 2021
The IUCN Congress (International Union for Nature Conservation) is taking place in Marseille, France from September 3rd to the 11th, bringing together NGOs, large companies, scientists, and public authorities to discuss biodiversity.
At the Congress, Robert-Alexandre Poujade will participate in the presentation "From strategy to action, best practices in Asset Management" and a virtual session: "Natural capital and green economy: embedding biodiversity in decision-making from business to policy”.
As a partner of the event, BNP Paribas is also represented through the participation of:
- Antoine Sire, Head of Company Engagement, on “Realigning Economy and conservation - Towards a Systemic Change in Economics and Finance”
- Sébastien Soleille, Head of Energy Transition and the Environment, on "Climate change and biodiversity interlinkages: from science-policy assessments to action"
- Isabelle Giordano, Director of the BNP Paribas Foundation, during a round table discussion on "Philanthropy and nature"
- Gwendolyn Yu, Head of Engagement Transformation, on the Transforming finance with the Global Biodiversity Framework
- Astrid Behaghel, Impact Investment Director - BNP Paribas Principal Investments, on "companies and research"
Photo credit: Nblxr