Consider these alarming facts. About 150 million tons of single-use plastic is produced worldwide annually, of which just 9% is recycled. A rubbish truck a minute ends up in the ocean.

 

Human activity is changing nature at a dangerous pace. More than 50% of global GDP depends on nature, yet there is evidence that humanity has already severely altered over two thirds of ecosystems. Put simply, humans are depleting natural stocks and flows far more quickly than the planet can replenish them – in 2021, this was at the rate 1.6 earths. This entails serious consequences for the natural world and the global economy.

 

Natural capital is the world’s stocks of natural assets including air, water, geology, soil, and all living organisms, including biodiversity within and between species and ecosystems. Each component is interconnected with impacts on one affecting the others.

 

For example, air pollutants such as sulphur dioxide (SO2) and nitrogen oxides (NOX) emitted by fossil fuel electricity generation and petrol vehicles ultimately degrade soil and aquatic systems and their biodiversity as acid rain.

An interconnected world
Climate change and natural capital depletion, of which biodiversity is one component, are also closely interconnected. It is key for investors to understand this dynamic to ensure coherent integration into their investment strategies.

A recent joint workshop report by the Intergovernmental Panel on Climate Change and the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services emphasise key elements investors and policymakers should keep in mind as they integrate biodiversity into the investment process.
Key elements to integrate biodiversity into the investment process
Key elements to integrate biodiversity into the investment process
Climate change and biodiversity loss share common drivers through human activities, and failure to address them both carry the risks of sudden, irreversible impacts due to positive and negative feedback mechanisms, which continually amplify or reduce a given effect. Permafrost melt is an example of a positive feedback: the melting releases methane, bringing about more warming, which then melts more permafrost, and the cycle continues.

Climate change poses a direct threat to nature and its contributions to people, with the extent of the impacts depending on our choices today. For example, ranchers deforesting the Amazon exacerbate climate change and degrade areas of high biodiversity value, which in the long-term puts in peril a main water source for themselves and their livestock. Some companies have developed solutions to address this challenge. Trimble, which provides solutions for the automation and integration of land registries and deforestation monitoring forests, is one such firm. The company provides advanced location-based software solutions for satellite and geo-positioning including GPS, laser, optical and inertial technologies.
Comprehensive approach
Effective actions to address climate and nature carry social benefits, and efforts to address biodiversity frequently have climate benefits. However, measures that address one factor in isolation – whether climate, nature, or social – tend to result in non-optimal solutions and this is particularly true for measures narrowly focused on climate mitigation. A case in point is deriving biofuels from crops such as corn or palm, which provide a cleaner fuel for vehicles than petrol, but come at a high cost to society and nature.

These findings compel us to integrate material biodiversity issues into our investments, alongside other stewardship priorities. It also compels us to mainstream biodiversity issues, as well as social factors, into our climate-related stewardship activities.

This is a tough feat, but we can be encouraged that much of the learnings from climate action can be directly applied to natural capital, including biodiversity. We believe investor approaches to biodiversity can draw from the guidance for climate action of the Paris Aligned Investment Initiative, taking a dual focus on opportunities to reduce impacts on biodiversity and nature and investment in biodiversity solutions.
Building on our legacy
In this context, a case study on managing plastics pollution is relevant. Recyclability is one angle of addressing the issue. However, many plastics are simply not feasible or even possible to recycle. Responsible substitution, such as through metals – which are more biologically inert, and endlessly recyclable – is part of the solution, particularly given packaging is the leading user of plastic by industrial sector. Ardagh Metal Packaging is one of the companies that can help break this cycle and has issued a green bond supporting its procurement and manufacturing of recycled aluminium packaging.

Jupiter has taken steps to engage on natural capital, such as by participating in collective engagements led by the FAIRR Initiative and the Investors Policy Dialogue on Deforestation (IPDD). Jupiter is also signatory to the Finance for Biodiversity Pledge, which commits the firm to protect and restore biodiversity through our finance activities and investments and will require us to set firm-level targets and report publicly on our progress before 2025.

Jupiter has a range of funds for which investing in companies and issuers directly addressing environmental challenges such as natural capital and biodiversity restoration are a formal objective in addition to sustainable returns for clients. This means our investments must promote a sustainable objective, such as the protection and restoration of biodiversity and ecosystems, while also doing no significant harm to other environmental and social objectives. We are committed to building on our 30+ years of legacy investing in companies solving the world’s impact on nature.

The value of active minds: independent thinking

A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.

Important information

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