The loss of biodiversity has financial and investment implications. While not-for-profits and investors such as ourselves are straining to actually quantify our risks, the qualitative indicators are mounting.
That the figures are high is universally agreed. The World Bank states that agriculture remains a major driver of deforestation, [1] while the FAO estimates that agricultural expansion was responsible for 90% of global deforestation. Massive efforts to re-forest are not enough – as the chart shows, the FAO estimates that new deforestation exceeds reforestation.
The EU estimates that it imports about 16% of global deforestation through imported food and feedstuffs, and is taking action. The EU Deforestation Regulation (EUDR) will require companies to provide full transparency to prove that imports of several high-risk commodities, such as cocoa, palm oil, and timber, do not come from land deforested after 2020.
Deforestation and Re-forestation
Investment Implications?
The World Bank’s estimate that biodiversity losses will cost us $2.7 trillion annually[2] ought to scare you. The difficulty of making precise estimates ought to scare you more. But if those sound bites don’t bother you, listen up: The EUDR includes sanctions. This regulation will apply not just to companies based in the EU, but also companies operating in the EU. Further, it covers deforestation outside of the EU. One might hope it will be a game-changer for biodiversity. But first, it may be a game-changer for your investments.
Eating away our future?
At Candriam, we believe protecting biodiversity means protecting economic value.
Our latest white paper, Eating Away Our Future, explores:
- The material and accelerating financial risks of deforestation for companies and investors.
- The impact of new regulation, transparency, and sanctions such as the EUDR.
- How nature has become a source of double materiality for investors, as companies impact ecosystems while ecosystem decline increasingly impacts corporate performance.