How asset managers include biodiversity protection in their investments

14:30 June 18, 2022

The offer of financial products dedicated to the management of biodiversity is born. Mono- or multi-purpose funds invested in the shares of listed companies appear with the aim of participating in the conservation or restoration of natural capital. A 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 in some forty securities of profitable and innovative growth companies, offering solutions that meet several of the biodiversity-related UN Sustainable Development Goals, explains Stefan Lago, Thematic Equity Specialist at Axa IM. The fund invests in four themes: sustainable materials including bioplastics and alternatives to plastic, 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 environmental data provider for financial institutions.

This type of fund is the visible part of a set of actions taken by asset managers to mitigate the effects of biodiversity loss. The first task is to really evaluate the stakes. “It’s a puzzle acknowledges Alix Chosson, ESG Senior Analyst at Candriam. The subject is difficult to understand, analyze and integrate into finance and, more broadly, into economic decision-making. This is due to its multidimensional nature, involving interactions between animal and plant species in ecosystems, as well as the lack of a generally accepted methodology and indicators to analyze the impact and value of a unit of biodiversity. » There seems to be a consensus on the notion of dual materiality: the dependence of a company or sector on the ecosystem services provided by nature, on the one hand, and the consequences of their activities on natural capital, on the other.

Internal ratings and analysis models

Another major project is data access, a necessary prerequisite for taking into account the subject in the ESG analysis (environmental, social, good governance) of asset managers. In France, two alliances have been formed 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 13,000 issuers six questions about biodiversity. Big step forward. 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 implementation of ratings and internal analysis models. This is the case of Mandarine Gestion, which developed the Mandarine Biodiversity Score. “It’s about identifying how biodiversity erosion can affect companies’ financial results, which can enrich financial analysis and refine manager’s decisions.explains Augustin Vincent, Head of ESG Research at Mandarine Gestion. This tool is based on the policy of each company in this area, and the pressure data is based on indicators specific to the company and its sector of activity. » The result is a score out of 100, tested against the Mandarine Global Transition fund portfolio, with a score of 49. “This reflects the effort that listed companies have to put in, but sometimes also poor biodiversity outcomes.”, Judge Augustin Vincent. By the end of the year, this review will be extended to all Mandarine Gestion funds.