How management companies include biodiversity protection in their investments

2:30 p.m., June 18, 2022

An offer of financial products dedicated to the treatment of biodiversity is born. Mono- or multi-theme funds invested in shares of listed companies are appearing with a view to taking part in the preservation or restoration of natural capital. A trend illustrated by Axa IM with the Axa WF ACT Biodiversity fund launched in April. “Within an investment universe of 200 companies with over $500 million in market capitalization worldwide, the fund invests in some forty securities of profitable and innovative growth companies, offering solutions that meet several United Nations Sustainable Development Goals, related to biodiversity, explains Stéphane Lago, specialist in thematic equity investments at Axa IM. The fund invests in four themes, sustainable materials including bioplastics and alternatives to plastic, earth and animal welfare, aquatic ecosystems, and packaging recycling and reduction. » To measure the impact of the fund’s portfolio on biodiversity, Axa IM relies on a partnership with Iceberg Data Lab, a French supplier of environmental data for financial institutions.

This type of fund is the visible part of a set of actions launched by asset managers to mitigate biodiversity loss. The first challenge consists in really taking the measure of the stakes. “It’s a puzzle, recognizes Alix Chosson, senior ESG analyst at Candriam. The subject is complex to understand, analyze and integrate into finance and, more broadly, into economic decision-making. This is linked to its multidimensional nature, which involves interactions between animal and plant species within ecosystems, but also to the absence of commonly accepted methodology and metrics for analyzing the impacts and determining the value of a unit of biodiversity. » A consensus seems to be emerging on the notion of double materiality: the dependence of a company or a sector on the ecosystem services provided by nature on the one hand, the repercussions of their activity on the natural capital on the other.​

Internal ratings and analysis models

Another major project is access to data, an essential prerequisite for taking the subject into account in the ESG (environment, social, good governance) analysis of asset managers. In France, two alliances have been formed to provide investors with databases and tools to assess the impact research of their investments: CDC Biodiversité and Carbon4 Finance on the one hand, Iceberg Data Lab and I Care & Consult on the other, following a call for tenders launched jointly by Axa IM, BNP Paribas Asset Management, Sycomore Asset Management and Mirova. In its 2022 questionnaire, the Carbon Disclosure Project (CDP), an international non-profit climate reporting platform, will ask six questions on biodiversity to 13,000 issuers. A big step forward. The information provided by listed companies is currently incomplete.

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These collaborative commitments do not prevent asset management companies from moving forward individually, through the implementation of ratings and internal analysis models. This is the case of Mandarine Gestion, which developed Mandarine Biodiversity Score. “It is a question of determining how the erosion of biodiversity can be reflected in the financial results of companies, which makes it possible to enrich the financial analysis and to clarify the decisions of the manager.explains Augustin Vincent, head of ESG research at Mandarine Gestion. This tool is based on each company’s policy in this area, with pressure data based on indicators specific to the company and its sector of activity. » The result is a score out of 100, tested across the portfolio of the Mandarine Global Transition fund, with a score of 49. “It reflects the efforts that listed companies must make, but also sometimes poor performance on the subject of biodiversity”, Judge Augustin Vincent. This screening will be extended to all Mandarine Gestion funds by the end of the year.

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