From the Covid 19 pandemic to the ramping up of the climate crisis, 2020 has been a year of incredible turmoil.
Biodiversity loss is a crucial issue linked to the challenges facing the planet and our economy, with the World Economic Forum highlighting it as a top-five risk for the first time in its Global Risks Report.
More than half of the world’s gross domestic product (US$44 trillion) is moderately or highly dependent on nature and its services, such as the provision of food, fibre and fuel. Further figures show the cost of maintaining healthy ecosystems is $300 billion per year, a sum which represents a tremendous return on investment. And above and beyond its monetary worth, it’s impossible to quantify our basic human need for fresh air, clean water and healthy ecosystems.
Here are five things we learned. Watch the conversation below.
Biodiversity is now an asset class
The idea of ‘biodiversity as an asset class’ is just starting to enter mainstream financial industry conversations. We’re at the beginning of internalising some of the externalities plaguing humanity.
It means there are some very inconsistent applications, and it’s even more challenging to figure out what the value of biodiversity actually is.
The UN’s Sustainable Development Goals (SDG) can help VCs invest in biodiversity
The UN’s SDGs cover different performance goals around human development, biodiversity, environmental protection and economic sustainability. They allow us to push capital down these funnels. You can then use the most granular component as a form of measurement. This means before we make an investment, we know there’s a specific quantity or ratio we can track through a company’s longevity.
Regulation needs to go further in championing biodiversity
Tagging biodiversity as an ‘asset class’ would be more useful if accompanied by irrevocable treaties and statutes. Even the Paris Climate Agreement doesn’t go far enough because participation is voluntary and can be revoked (as in the US).
Limited partners (LP) need to start thinking differently about where to invest
For ventures to push sustainable investing in the right direction, LPs need to start making different choices about where to put their money and the opportunities which represent great investments from a sustainability perspective.
ESG needs real-world data and enhanced communications
From a general environmental perspective, the companies in Expon’s portfolio are first chosen to mitigate negative environmental consequences and second because we believe they have the power to push on one of these major sustainability levers. We’re actively looking for companies that attack this problem from the core. We’re also anticipating several of our companies to have positive knock on benefits that enhance biodiversity through crop diversity and protected critical lands..
In terms of how we measure this kind of impact, there needs to be greater communication about what ticks the box and what doesn’t and what investors are looking for – whether it’s specific environmental performance, human-related performance, economic goals, international development goals.
Visit exponcapital.com to find out more.
Colleen and Owen’s top book pick:
And we’re reading these articles too: