These are tough times for global policy making around sustainability. The rise of nationalism is challenging cooperation. Social media is changing how politics works. Inequality and poverty are causing real anger and soaking up political capital.
Even five years ago it was considered sensible to base policy on evidence. Now we’re told, “we don’t need experts”.
Despite this, of course, the experts are still quietly working hard to develop evidence-based policy. Trying to avoid bias and inviting alternative opinions to help drive towards the truth.
In the world of sustainability, such experts sometimes seem to be presenting into a vacuum. This is a scandal and a real problem. The drumbeat of their message is growing and becoming increasingly alarming.
Over the short term the fund’s performance has continued to gyrate along with the market around news-flow on US – China trade negotiations. Meanwhile, in May, a troubling new piece of analysis was published. The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) published the Global Assessment Report on Biodiversity and Ecosystem Services. That sentence alone has enough jargon in it to make a populist politician’s eyes glaze over. But this is an important report.
The IPBES is an offshoot of the United Nations. It is a network of experts, boffins and scientists. In its own words, it is “the intergovernmental body which assesses the state of biodiversity”. There is no more authoritative body on the topic.
145 expert authors from 50 countries put the report together over three years. They analysed biodiversity changes over the past five decades. The message was straightforward. The first line of the media release reads as follows:
“Nature is declining globally at rates unprecedented in human history – and the rate of species extinctions is accelerating, with grave impacts on people around the world…”
Five key mechanisms are creating this problem. They are, in descending order: 1) changes in land and sea use; 2) direct exploitation of organisms; 3) climate change; 4) pollution and 5) invasive alien species. All require long-term multilateral policy responses. This will be a challenge in the current political climate.
WHEB has always been interested in biodiversity. It holds the key to much of why the natural world is so precious. We are very keen to invest in its protection. We already do, to some extent.
Any of our investments which reduce emissions also tangentially protect biodiversity, as suggested by the third heading above. And we have several companies which help combat pollution, such as China Everbright International. But we also have a few more direct examples in the portfolio.
DSM, in our Wellbeing theme, has a joint venture with the German speciality chemicals company Evonik called Veramaris. Veramaris is developing an algae-based feedstock for farmed fish. Farmed fish are currently fed largely on captured wild fish, so Veramaris will reduce the take from the oceans. Staying in the ocean, Ecolab, in our Environmental Services theme, has several products which treat ballast water. The ballast water of large ships is a key route by which invasive alien species spread around the globe.
The other direct exposure to biodiversity is through our holding in Smurfit Kappa. 75% of the company’s raw material is recycled cardboard, but cardboard is not recyclable indefinitely. The company owns timber lands to supplement recycled fibre with virgin fibre and over 90% is certified to a recognised sustainability standard. A further 22,000 hectares of natural forest is conserved by the company.
We also invest in several companies which help monitor biodiversity. Intertek, in our Safety theme, inspects physical locations as well as goods in transit, that check for biodiversity impacts. Several of our companies, including Agilent and Horiba, produce the tools to do that testing.
Overall though, investment opportunities that help improve biodiversity are limited. Our nine major themes have been in place since 2012, but we are often asked whether we would add any others. Biodiversity is often discussed, but currently we don’t think there are enough biodiversity-facing listed companies. Certainly not enough that meet our size and liquidity requirements.
Hopefully this situation won’t last much longer. Clever companies often move before markets. Whilst policymakers ignore experts, the private sector often listens. And with ecosystems services in increasingly short supply, the opportunities will only grow.