Environmentally conscious investors have funneled billions of dollars into clean energy, but investments to better protect and manage the world’s ecosystems remain minuscule in comparison.
That gap could close after negotiators at the UN biodiversity COP15 in Montreal on Monday secured long-awaited formal support for a Global Biodiversity Framework to protect nature. But plans have yet to come to fruition on how to channel the huge amounts of capital from private and public sources that scientists say are needed for conservation.
A growing number of investors concerned about managing their money with environmental, social and governance (ESG) considerations have looked to the agreement for indications about the future shape of new financial instruments and rules to protect forests, wetlands, waters and everything in between. .
Some managers have already pressed. Some 74.3 billion euros ($78.8 billion) have already been invested in funds aimed at protecting environmentally friendly environments in land, air and water, according to Morningstar data.
Morningstar lists 175 funds executing investment strategies that are intended to invest in companies, or securities, that are involved in industries that positively impact the environment. It groups these funds under a theme it calls healthy ecosystems.
The five largest healthy ecosystems funds are managed by Pictet, BNP Paribas Asset Management and Amundi, and account for €21.6 billion, or nearly a third of the entire group.
These funds are largely concentrated in the utility and industrial sectors: six of the top ten funds outperform industrial sectors in the MSCI ACWI index, and half outperform utilities.
Investment strategies specifically targeting biodiversity are an even more incipient product. Just €907.6 million is invested in Morningstar’s top ten equity funds with biodiversity in their name.
Limited data collection and reporting and the difficulty of measuring a company’s impact on biodiversity are seen as major barriers to investment for managers.
“We know the global economy and every company involved in it is negatively impacting biodiversity,” said Tom Atkinson, portfolio manager at AXA Investment Managers, which has a €117m biodiversity impact fund.
“At the moment, we can only assess the negative impact [sobre a biodiversidade] of the companies in our portfolio, which is why there are no more funds for biodiversity and why regulation is undoubtedly dragging on.”
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