How management companies incorporate biodiversity protection into their investments

June 18, 2022 at 2:30 p.m.

A supply of financial products dedicated to the treatment of biodiversity is emerging. Mono- or multi-themed funds invested in shares of listed companies appear to participate in the preservation or restoration of natural capital. The trend illustrated by Axa IM with the Axa WF ACT Biodiversity Foundation launched in April. “Within an investment universe of 200 companies with a market capitalization of more than $ 500 million worldwide, the fund invests about forty securities of profitable and innovative developing companies, offering solutions that meet several of the UN’s biodiversity goals. , explains Stefan Lago, Axa IM thematic equity specialist. The fund invests in four themes, environmental materials, including bioplastics and plastic alternatives, land and animal welfare, aquatic ecosystems, and packaging recycling and reduction. » To measure the impact of the fund’s portfolio on biodiversity, Axa IM relies on a partnership with Iceberg Data Lab, a French provider of environmental data for financial institutions.

This type of fund is a visible part of a set of measures taken by asset managers to mitigate biodiversity loss. The first task is to really measure the rates. “It’s a puzzle, admits Alix Chosson, senior analyst at ESG Candriam. The subject is difficult to understand, analyze and integrate into finance and, more broadly, into the economic decision-making process. This is due to its multidimensional nature, which involves the interaction of animal and plant species within ecosystems, as well as the lack of generally accepted methodology and indicators for analyzing the impact and determining the value of a unit of biodiversity. » There seems to be a consensus on the concept of dual significance: the dependence of a company or sector on ecosystem services provided by nature, on the one hand, the consequences of their activities for natural capital, on the other.

Internal ratings and analysis models

Another major project is access to data, which is an important prerequisite for taking this subject into account in the ESG (environment, social, good governance) analysis of asset managers. In France, two alliances have been established to provide investors with databases and tools to assess the impact of their investments: CDC Biodiversité and Carbon4 Finance, on the one hand, Iceberg Data Lab and I Care & Consult, on the other, following a call for tenders launched jointly by Axa IM , BNP Paribas Asset Management, Sycomore Asset Management and Mirova. In its 2022 questionnaire, the Carbon Disclosure Project (CDP), an international non-profit climate reporting platform, will ask six questions about the biodiversity of 13,000 issuers. A big step forward. The information provided by listed companies is currently incomplete.

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These joint commitments do not prevent asset management companies from moving forward on their own through the introduction of ratings and internal analysis models. This is the case of Mandarine Gestion, which developed an assessment of mandarin biodiversity. “It is about determining how the erosion of biodiversity can affect the financial results of companies, which allows to enrich the financial analysis and clarify the decisions of the head.explains Augustine Vincent, head of ESG research at Mandarine Gestion. This tool is based on each company’s policy in this area, and the pressure data is based on indicators specific to the company and its sector. » The result is 100 points tested in the Mandarine Global Transition’s portfolio, with 49 points. “This reflects the efforts that listed companies have to make, but also the sometimes poor results in terms of biodiversity.”, Judge Augustin Vincent. This screening will be extended to all Mandarine Gestion funds by the end of the year.