Robert Nussey, Dr. Andrea Bueno
February 17, 2025
Why is preserving biodiversity a strategic imperative for investors?
As investors increasingly prioritise sustainability, biodiversity—key to long-term resilience—is often overlooked. Robert Nussey and Dr. Andrea Bueno share insights on why biodiversity matters, how private equity investors can integrate it, and why acting now is essential for long-term value creation.
RN: Biodiversity is a hot topic for investors right now, and for good reason. Healthy ecosystems provide essential services that the global economy relies on. When biodiversity declines, these services can be disrupted, leading to higher costs and lower productivity.
Investors need to understand the companies they invest in, especially those dependent on natural resources or impacting biodiversity. This understanding helps manage potential reputational and regulatory risks, as the World Economic Forum identifies biodiversity loss as one of the top global threats in the coming decade.
Protecting biodiversity is also crucial for community well-being. As consumers and stakeholders increasingly demand responsible environmental actions, ignoring biodiversity can lead to reputational damage.
Investing in companies that prioritise biodiversity often results in more sustainable growth as these companies tend to be more resilient to environmental changes and regulatory requirements. Recent research shows portfolios with lower biodiversity risks typically deliver higher cumulative returns.
Finally, aligning with global biodiversity initiatives opens up new investment opportunities. By considering biodiversity in investment decisions, investors can not only mitigate risks but also tap into profitable, sustainable ventures.
RN: Global requirements are reshaping how investors should approach biodiversity. They aim to reverse biodiversity loss and redirect financial flows into activities that restore nature.
For instance, the Kunming-Montreal Global Biodiversity Framework (GBF) sets targets like increasing financial resources for biodiversity and requiring large companies to report their biodiversity impacts. The Corporate Sustainability Reporting Directive (CSRD) mandates detailed environmental and social reporting, including biodiversity, to help investors better evaluate sustainability performance. Similarly, the Sustainable Finance Disclosure Regulation (SFDR) increases transparency by requiring financial institutions to disclose how they integrate sustainability risks, including biodiversity, into investment decisions.
While these regulations may seem complex, they align investments with global sustainability goals.
Investors should foster a deep understanding and create policies that reflect these regulations to mitigate financial risk and support a more sustainable future. By doing so, they can effectively navigate regulatory landscapes while contributing to global sustainability efforts.
AB: To embed nature into financial decisions, investors should first foster an organisational approach to biodiversity. This involves building internal knowledge, securing senior-level support, and making biodiversity part of the company culture.
The next step is to assess the portfolio’s exposure to biodiversity-related impacts, dependencies, risks and opportunities across assets. One way to do this is by following the TNFD’s LEAP approach to assess and measure potential nature issues of the business activities receiving investments. Based on the assessment, investors can develop a strategy that protects biodiversity and prioritises material risks and opportunities. Integrating biodiversity metrics, such as Ramboll’s Global Biodiversity Metric, into the asset assessment criteria can support the incorporation of biodiversity considerations into the investment decision-making process.
The strategy should also include transparent targets aligned with global ambitions such as the GBF and establish an approach to track performance. Lastly, asset owners can adopt public commitments and disclose their biodiversity-related issues and actions to address them, and keep their stakeholders informed through regular reporting. A biodiversity policy can help consolidate these efforts, outlining how risks and opportunities related to biodiversity are identified, managed, and monitored.
RN: There are plenty of organisations providing specific best practices for the finance sector. For example, the Finance for Biodiversity Foundation highlights how financial institutions can mitigate risks and seize opportunities by investing in biodiversity-friendly projects. The Partnership for Biodiversity Accounting Financials (PBAF) provides a standardised approach for assessing and disclosing biodiversity impacts, helping financial institutions to make informed decisions and enhance their sustainability credentials. UNEP FI also offers guidance on setting biodiversity targets, enabling banks to systematically integrate biodiversity considerations into their strategies. As a result, these best practices lead to more resilient and sustainable financial portfolios.
AB: With growing awareness of biodiversity risks and the rise of new regulations and voluntary reporting, the demand for comprehensive nature-related data is increasing. Organisations are under pressure to better understand and address their impact on nature.
Digitalisation is key, providing high-quality data essential for informed decision-making and accelerating investments in nature. Innovations like remote sensing, eDNA sampling, and AI are making it easier and more cost-effective to collect and process data at scale, monitor the state of nature efficiently, and predict future scenarios with better accuracy – improving planning, management, and mitigation efforts.
AI, in particular, offers unprecedented possibilities. It can analyse data in new ways to reveal businesses-nature interactions and identify appropriate interventions. But there are also challenges to consider, including the environmental impact of the technology itself, biases in data, ethical concerns over equitable access, and the risk of over-reliance on AI at the expense of traditional ecological knowledge and methods. Tackling these issues requires ongoing collaboration and cross-sector engagement.
Ultimately, digital transformation is a powerful enabler of biodiversity protection, changing how we collect, store, and process data to gain insights. While these technologies are still evolving, they offer good opportunities to accelerate efforts against biodiversity loss.
AB: For private equity investors, the most important takeaway is to act now. Balancing measurement and action, and focusing on high-impact sectors, will help drive operational efficiencies and create long-term value. Biodiversity isn’t just an environmental issue; it’s a strategic imperative that should be at the forefront of investment decisions. By integrating nature into every phase of operations, investors can mitigate risks, seize opportunities, and contribute to a more sustainable future.
Want to know more?
Robert Nussey
Nature Positive Manager
+44 7974 404579
Andrea Bueno
Senior Consultant, Biodiversity & Ecosystems
+49 1522 4203996