The COP15 and COP26 events have rightly attracted much attention in the press as they are crucial if climate change and biodiversity loss are to be brought under control. At this potential turning point for the world, Harry Thomas, Co-Portfolio Manager of the TT Environmental Solutions Strategy, recently held a discussion with Dr Joseph Bull to learn more about what these events could mean, both for the planet and investors.
Dr Bull is a Senior Lecturer in Conservation Science at the prestigious Durrell Institute of Conservation and Ecology. Following his time as a private sector environmental consultant focusing on ecology and climate change, he gained a PhD at Imperial College London. He also completed a postdoctoral fellowship at the University of Copenhagen, and remains a visiting researcher at the University of Oxford. Dr Bull is also a member of the TT Environmental Solutions Fund Research Advisory Board. Given Dr Bull’s background in conservation and ecology, the discussion also attempted to shine a light on how investors can comprehend and mitigate the existential threat of biodiversity loss, which can often be overshadowed by the better-understood issue of climate change. A summary of the discussion can be found below.
Harry Thomas: What are your hopes and fears coming into these conferences?
Dr Bull: First and foremost, with regard to COP15, I hope that there will be a strong high level commitment to reverse biodiversity loss. For example, there could be a target that by 2030 we will have arrested biodiversity loss or even started to reverse it so that we are actually restoring ecosystems. This commitment could either focus on net biodiversity gains or simply look to increase the overall amount of nature in the world; the end result would be similarly positive. It was encouraging to see such a commitment in the draft that is currently being worked on for the post-2020 biodiversity strategy, but clearly it is vital that it remains in the final version of the draft. Of course, it is absolutely key that there are detailed suggestions for how the necessary resources will be devoted to achieving that overarching objective. In this context resources could mean human involvement, capacity building, practicalities of implementation, and finance. Without these detailed suggestions, it will be almost impossible to meet any high level commitments. This is something that needs to be recognised explicitly at the conference.
Another hope with regard to the post-2020 biodiversity strategy is that the private sector will be brought even more strongly into the fold. Biodiversity strategists have long recognised the need to engage with the private sector in meeting global goals, but the importance of the private sector has arguably been underplayed. Finance is extremely important, particularly ensuring that finance flows to the right places to support conservation and climate change mitigation. This is a key topic that I hope will be better reflected in biodiversity strategy going forward. To include the private sector more effectively, it is important to consider which policies need to be set at a national level that incentivise and encourage the private sector to participate. Where we have seen the most success in terms of biodiversity impact mitigation, it has often been founded in applied policies linked to regulation and finance. Collaborating and engaging voluntarily with the private sector can lead to some good outcomes, but for widespread impact at scale there needs to be a discussion around how policies, regulation and subsidies can be implemented in a way that better incorporates the private sector. Given that many private sector organisations support these types of initiatives, I think they would be willing to be brought into the fold, assuming a level playing field. In order to do so, we must consider what kind of frameworks can be put in place to understand, measure and ultimately mitigate the impact that private sector organisations have on biodiversity, not only directly but also up through their supply chains.
Conversely, I fear that COP15 will focus too heavily on species rather than biodiversity more broadly. Put simply, biodiversity is the variety of life on earth. It covers three levels: genes, species and ecosystems. All three are crucial for our planet’s global ecosystem to function effectively, but in the past there has often been more of a focus on species compared to the other two aspects. There has also been a heavy focus on actions rather than outcomes in biodiversity conservation. For instance, there is a widely cited objective to protect 30% of the planet's surface by 2030. However, this is very much an action-based idea. It may not be an optimal objective because protection doesn’t necessarily translate into good outcomes for nature. Another fear that applies to both COP15 and COP26 is that the promises made will be too high level, without sufficient detail on how they’re going to be implemented.
Finally, with COP26 in particular, there is a lot of discussion around who will or won’t be attending. This has served to undermine previous conferences. Of course in an ideal world every country would get on board with the forthcoming strategies to mitigate climate change and biodiversity loss, but even if some don’t, and even if they are amongst the biggest emitters, it doesn’t mean that the rest of the world can’t make progress. It would be a great shame if the lack of representation of certain countries derailed the narrative.
Do you think COP15 Part 1 achieved its objectives? If not, does this affect your confidence that COP26 can deliver?
One of the key objectives of COP15 is to negotiate the post-2020 global strategy for biodiversity and the roadmap going forward. It is too early to say whether COP15 has achieved its aims as we will need to wait for Part 2 of the conference next year. Some people point to analysis which suggests that the world has not met all of the targets set out in the previous strategic plan for 2011-2020 as evidence that COP15 and COP26 will be ineffective. However, the fact is that many of the targets have been partially achieved and we have clearly made progress. These targets are extremely difficult to meet, partly because they are politically negotiated and in many cases are deliberately vague to allow for agreement across a wide variety of nations. It is important not to get hung up on the idea that we have failed to meet these targets and instead reflect on the progress that has been made. We must also attempt to ensure that the next set of targets are similarly ambitious, but also better designed.
It is worth noting at this stage that COP15 Part 1 is significant for what it represents; it demonstrates that we have maintained momentum around environmental issues in terms of political will, public perception and scientific input. Such momentum should not be taken for granted as it is crucial if we are to see the right type of agreements that are realistic and can be implemented then enforced in the future. The fact that we have maintained this momentum even through the unprecedented disruption of a global pandemic makes me optimistic about COP26.
The same argument can be put to those who contend that we are significantly off track to meet the Paris Agreement targets set back in 2015. Again it is important to acknowledge that we have made some progress towards these targets, and also that COP26 should be more effective because momentum is clearly building as a result of the changing social context. Since the Paris Agreement six years ago, climate change has become a far bigger part of the mainstream conversation globally. There is much wider and deeper recognition of the challenges that we are facing due to climate change. This is manifest in the mass movements witnessed in recent years, as well as how businesses approach climate change and other related frameworks like the Sustainable Development Goals. Even on the political front, policymaking around climate change has come a long way in the last few years. Countries are setting targets for net zero and detailing how they intend to reach this goal through specific changes to areas such as housebuilding, car engines, renewable energy generation and insulation among many others. This gives me confidence that COP26 could be more effective than previous conferences because it is taking place in a very different context.
The Costa Rican President recently argued that “Life depends on ecosystems, both for water and clean air, as well as for many of the services that ecosystems give us.” Do you feel that statement is one that will be reflected with sufficient strength in announcements and policies post COP15 and COP26?
There is growing recognition of the myriad ecosystem services provided by biodiversity and as such I believe that the statement above will be reflected strongly in the high level announcements and policies following COP15 and COP26. It is likely to be reflected particularly strongly in the concept of nature-based solutions, which are a big focus for COP26. To be clear, nature-based solutions are one of the best approaches for mitigating greenhouse gas emissions. An example would be reforestation that allows trees to provide an ecosystem service in the form of soaking up carbon.
Whilst I believe nature-based solutions will feature heavily in the high level rhetoric, the key challenge will be to ensure that they are reflected in the targets that are laid out in specific detail for each country to agree to and absorb into their national policy making framework. This is more difficult because ecosystem services can be hard to capture and define. There is a host of different services ranging from very physical ones like flood risk prevention to relatively well understood processes such as pollination and more subjective cultural services, which are based on different people’s perspectives and attitudes towards various components of biodiversity. Unfortunately, the connections between people and how they receive ecosystem services are not straightforward to map and set targets around.
Why is there a perception that biodiversity destruction has been overshadowed by climate change? Do you think “Protecting and restoring ecosystems” being a headline objective of COP26 will help to bring biodiversity challenges to the fore?
It is important to say at the outset that biodiversity destruction has not always been overshadowed by climate change. There have been very high profile conservation campaigns, for example around saving marine animals, as well as localised efforts to conserve green space. However, in a general sense I think biodiversity loss is a more difficult message to communicate to the public, or at least we haven’t found as effective a way to do so as we have for climate change. The latter has been distilled into a relatively straightforward argument that releasing more greenhouse gases into the atmosphere will cause the world to warm up, leading to a range of disastrous consequences for humanity. Although that is somewhat of a simplification of how the global climate system works, we have managed to create a powerful story that is readily communicable. By contrast, the biodiversity crisis remains a far more complicated issue in terms of how it is conveyed. What’s good or bad about it? What even is it? There is less of an intuitive grasp of the problem. Importantly, this is not necessarily because it is actually more complicated, but rather that we haven’t found the right way to communicate it yet. We have also had much less success in finding tools and metrics that can be applied to the biodiversity conservation challenge. Again in the case of climate change we can focus on a single metric – tonnes of greenhouse gas emissions – and people can easily grasp that. We can utilise the Greenhouse Gas Protocol so that any business can measure its emissions and benchmark them in a standardised way. Having a set of metrics that can be universally applied provides a consistent approach to climate change mitigation.
This simply doesn’t exist for the problem of biodiversity conservation, and again one of the main hurdles is subjectivity. At a global level, it is easy to posit that losing biodiversity is bad, but at a smaller scale the argument becomes more nuanced. In many parts of the world, the number of species has actually increased, but that is only because of invasive species. These divide opinion: some people want to conserve them in certain places and other don’t. Similarly, many people are keen to conserve certain megafauna species like elephants or tigers, yet people living alongside these species often don’t share that view, and even if they do they have to live with the consequences of such conservation efforts, including decimation of crops or predation of humans. This extra layer of subjectivity is challenging for scientists working towards a way of unifying the biodiversity problem in the same way that they did for climate change. Of course, many people are working very hard to do so, and I’m confident that they will ultimately be successful.
Their efforts will certainly have been supported by the fact that ‘Protecting and restoring ecosystems’ is a headline objective of COP26, which demonstrates that there is very strong alignment and interplay between the societal goals of climate change and biodiversity loss. The two issues are closely interlinked and it is vital for people to recognise that there is no way to solve the climate change problem without nature conservation and restoration being a big part of the solution. Similarly, climate change is going to become an increasingly important threat to biodiversity, meaning that solving climate change will be part and parcel of solving the broader biodiversity crisis. With this in mind, it is encouraging to see a demonstration of the link between the two conferences and their aligned objectives.
What role can financial markets play in protecting biodiversity?
The main causes of biodiversity loss are land use change for agriculture, infrastructure development and urbanisation, as well as the overharvesting of species. As the gatekeepers of financial resources, those providing capital have a pivotal role to play in determining the outcomes of these activities and it is therefore vital for financial market participants to understand the leading causes of biodiversity loss and factor this into investment decisions. This could mean either precluding the provision of capital to certain areas, or almost as effectively, applying safeguards to investments to ensure they demonstrate positive biodiversity outcomes. Taking the concept one step further, there is a huge opportunity to invest in those companies that are offering solutions to the problem of the biodiversity loss, as the TT Environmental Solutions Strategy does. Examples include investments that lead to reduced consumption, reduced land take for economic activities, and more sustainable use of commodities like fish and forests.
Which companies and industries are leading the way in biodiversity conservation?
The companies that I’ve seen doing particularly good work on biodiversity conservation tend to be very public facing and therefore have strong motivation to do so in order to improve the perception of their brands. Examples include consumer products companies, food and beverage businesses and the fashion industry. Another set of industries that are progressive in this regard are those that have supply chains which rely directly on functioning ecosystems. One example would be fisheries as sustainable fishing stocks are crucial to their long-term success. Somewhat paradoxically, many of the most damaging extractive industries like oil and gas have actually led biodiversity conservation efforts for the last couple of decades. This is partly because they have very visible brands, but also because they are heavily regulated. Elements of the finance industry are also making progress. When it comes to the major lenders and multilateral development banks, there has been a trend towards implementing safeguards on investments to protect biodiversity, which is starting to have a big effect.
How would you advocate that investment portfolios are assessed from a biodiversity angle?
Among the most salient factors for assessing the biodiversity impact of an investment portfolio are supply chains, commodity chains and geography. These are far more important than they are for related issues such as climate change. It is vital to determine where investee companies are active as some parts of the world are already much more heavily modified than others. For example, Western Europe is very impoverished from a biodiversity perspective compared to areas such as the tropics. Companies that operate in geographies that are relatively undisturbed are likely to have a far greater impact on biodiversity.
In many cases, the direct impact of a company on biodiversity is overshadowed by the indirect impact from that company’s supply chains. Organisational analyses have shown that what companies choose to buy and where they buy it from can have a huge impact on biodiversity in other parts of the world. It is not always easy to understand these impacts because supply chains are often quite opaque, but there are certain red flags to look for. One is having a lot of supply chains linked to commodities in places such as the tropics where biodiversity is relatively intact. Another is having significant exposure to wild commodities, which are often far more impactful than agricultural commodities. Extractive sector commodities can also be highly impactful, despite significant efforts by these companies to offset this. For example, a recent study looked at the impact of metals being mined for renewable energy technologies. Clearly these technologies are a key part of the transition towards a more sustainable economy, but the supply chains for these metals are often in parts of the world that will have a huge impact from a biodiversity perspective.
It is also important to recognise that the degree of regulation and transparency in supply chains can vary enormously. Many commodities are governed by accepted standards such as MSC for fish, FSC for forestry products and RSPO for palm oil. Clearly there is further work to be done to make these certification schemes more effective, but extremely opaque supply chains with no certification scheme or interrogation of the impact of those supply chains would be another red flag to look out for.
Nothing in this document constitutes or should be treated as investment advice or an offer to buy or sell any security or other investment. TT is authorised and regulated in the United Kingdom by the Financial Conduct Authority (FCA).