BNP AM

The sustainable investor for a changing world

COP15: Engaging with investors on biodiversity loss

Coming on the heels of the COP27 global climate conference, whose outcome was mixed, hopes are high that the UN COP15 Biodiversity Conference will make progress on a global framework with measurable targets to halt and reverse nature loss. ESG analyst Lise Tanfin highlights the dire effects of plastic pollution and discusses how investors can help address the issue.  

A COP15 action plan would help ensure that the 2050 vision of ‘Living in harmony with nature’ is achieved. The meeting is also likely to see efforts to secure global support for commitments such as the target to protect at least 30% of the world’s land and oceans by 2030. [1]

According to IPBES, the five biggest direct drivers of biodiversity loss are climate change, changes in how land and seas are used, natural resource use and exploitation, invasive species, and pollution. Plastic pollution is a major issue. Without large-scale action, plastic pollution is expected to triple by 2040, with single-use plastic accounting for 80%, a Planet Tracker report finds.

This has implications for natural habitats, ecosystems and human health and here we believe companies have a critical role to play. The Business Coalition for a Global Plastics Treaty [2] aims to address three key areas: Curbing plastic production and consumption by adopting circular economy principles; preventing and eliminating plastic leakage into the environment; and increasing the circularity of necessary plastics.

From a solutions perspective, we believe active engagement with the biggest polluters across the supply chain is critical. Transitioning to less polluting alternatives such as bio-sourced plastics for packaging, consumer goods and textiles can offer environmental benefits including lower lifecycle emissions. [3]

Engaging with investors

Investors can play a large role in helping to tackle plastic pollution through investments. The UN PRI Plastics Investor Working Group, of which BNPP AM is a member, gives recommendations on integrating the transition to a circular economy into investments in a recently published paper. The first step is to identify industries with high linear material consumption and large environmental footprints and re-allocate finance to industries that prioritise circular principles.

Recently, we published our initial findings on the biodiversity footprint of our investments based on major issues including water pollution and measuring plastic entanglement. Given the large impact of plastic pollution on nature and human health, we believe ESG data providers must include more plastic-specific data points. This should help investors to understand the risks associated with their investments more clearly.

More broadly, investors should engage with stakeholders to tackle barriers to a circular economy. Food retailing is one industry that could benefit substantially since nearly 85% of plastic packaging waste ends up in landfills or as unregulated waste. Investors can push for faster progress through proxy votes. For instance, this January, we supported a resolution calling on a company to cut plastic waste to zero by 2030 and disclose how it will meet its sustainability targets to shareholders.

At this point,forecasts for reductions in plastic consumption foresee minimal changes before 2025, according to a Planet Tracker prospective study. Corporate progress to curb plastic waste has been slow.

Improving transparency

Achieving progress will require ambitious policies. The EU is taking steps by introducing a range of measures for all stages of the supply chain – including implementing waste-reducing design requirements, mandating labels to inform consumers of the plastic content of products and disposal options, and waste management obligations for producers.

For BNP Paribas Asset Management, knowing how companies perform when it comes to biodiversity matters. This may influence decisions on whether to invest. For that reason, we recently provided funding to CDP, the not-for-profit organisation that runs the world’s environmental disclosure system for companies, to add questions linked to nature-loss and biodiversity to their research questionnaires. 

According to new data from CDP, a majority of companies worldwide are not translating commitments on biodiversity into action.

To make informed decisions and reduce our footprint, we need to know what companies do about their biodiversity-related commitments. Our partnership with CDP should help shed light on the performance of companies in our investment universes and force them to provide better and more consistent information about their biodiversity-related commitments.

Références  

[1] Also see More than 100 Countries Now Formally Support the Global Target to Protect at least 30% of the Planet’s Land and Ocean by 2030  

[2] BNPP AM has joined the coalition and endorsed its Vision Statement in October 2022  

[3] Also read Towards a binding global treaty to end plastic pollution  

Disclaimer

Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

Environmental, social and governance (ESG) investment risk: The lack of common or harmonised definitions and labels integrating ESG and sustainability criteria at an EU level may result in different approaches by managers when setting ESG objectives. This also means that it may be difficult to compare strategies integrating ESG and sustainability criteria to the extent that the selection and weightings applied to select investments may be based on metrics that may share the same name but have different underlying meanings. In evaluating a security based on the ESG and sustainability criteria, the Investment Manager may also use data sources provided by external ESG research providers. Given the evolving nature of ESG, these data sources may for the time being be incomplete, inaccurate or unavailable. Applying responsible business conduct standards in the investment process may lead to the exclusion of securities of certain issuers. Consequently, fund performance may at times be better or worse than the performance of relatable funds that do not apply such standards.