Deep Dive #7: Biodiversity Loss

The purpose of this Deep Dive Report is to gain a greater understanding of how companies are coping with the biodiversity crisis.

Nature, the global economy and human prosperity are inextricably linked. However, it is clear that there is a lack of acknowledgement amongst corporations of how much they are reliant on, and impact, nature. Beyond acknowledgement, even fewer action plans have been produced on how to cope with accelerating extinction rates amongst living organisms and their effect on business. As a result, we have chosen to approach this engagement project slightly differently to those we have undertaken in the past. We have focused on research organisations, charities and academics when gathering information in the hope that we can use this as the foundation for future considerations of ecology as part of environmental risk analysis in our investment process.

There are some companies that have already begun their journey to nature positivity. We have been able to speak to some of them as part of our project. However, even in the cases of these first movers, understanding the quality of their methodologies is difficult due to the absence of specialised third-party assessment frameworks.

Yet there is a silver lining in this regard. Emerging models for best practice are being drafted. Chief among them is the Taskforce on Nature Related Financial Disclosures (TNFD). The TNFD was established in response to the growing appreciation of the need to include nature when making financial and business decisions. The TNFD is an initiative designed to offer market participants a roadmap for risk management and disclosure on evolving nature-related risks and opportunities. The ultimate aim is to catalyse a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes. We have participated in calls, roundtables, and workshops to provide feedback on the beta version of the TNFD framework. You can read more about this framework on Page 14 of this report.

The crisis of biodiversity loss and the exceeding of planetary boundaries should lead to widespread recognition that social and economic resilience is only as strong as nature itself. We are not separate from it but are within it. The pushing of ecological tipping points beyond their recovery thresholds will lead to untold damage. The lack of reporting and action to address this pending catastrophe should be addressed as a matter of urgency.

At Montanaro Asset Management, through our investment decisions and as a responsible business, we try our best to ensure that we are stewards of nature, the biosphere and client capital. We, along with a growing number of other important stakeholders, are working towards a nature-positive transition that can bring about a better world.

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