Top 3 challenges and opportunities in promoting biodiversity through sustainable investment

With its breathtaking beauty and grounding aura, nature has the ability to mesmerize and inspire. But as biodiversity loss intensifies, the elements that form nature’s richness are in jeopardy of vanishing before future generations can savour them.

From 2000 to 2013, the world lost 1.9 million square kilometres of wilderness—an area the size of Mexico. Meanwhile, global populations of mammals, fish, birds, reptiles, and amphibians have declined by sixty-nine per cent since 1970.

Despite these statistics and half the global GDP reliant on the health of nature, there's a $700 billion annual funding gap to address the challenges facing biodiversity conservation.

Targets for sustainable investing

The adoption of the Kunming-Montreal Global Biodiversity Framework at COP15 in 2022 provided some optimism in the fight to halt biodiversity loss. The historic deal saw 196 countries acknowledge the need for immediate action by agreeing on 23 global targets to be achieved by 2030.

Targets 14 and 19 of this historic agreement urge financial institutions to contribute to the cause by integrating biodiversity into investment decision-making and investing in innovative financial solutions.

While these targets seem promising in theory, executing them in this obscure and evolving domain of sustainable finance comes with its challenges.

Here are three obstacles and opportunities finance professionals need to navigate to align investment with biodiversity conservation.

Challenge 1: Lack of data

Companies are increasingly relying on data to drive decision-making. And this is no different in sustainable finance. Without sufficient data, investors lack the insights they require to allocate their funds responsibly and efficiently.

“This means that asset owners are likely overexposed to the risks and underexposed to the opportunities,” notes sustainable finance leader Jason Taylor.

Opportunity 1: Pioneer tools for data collection

The limited information also paves the way for startups, fintechs, and software providers can evolve their sustainability offerings.

"Investors who put in the work can position their portfolios before assets experience a more systemic re-pricing for nature and biodiversity once these considerations become more mainstream in the investment process," explains Taylor.

Financial organizations can build off the initial reporting to develop new tools for data collection, positioning them as innovators in the field.

Challenge 2: Difficulty developping accurate valuations of companies, assets, and industries highly dependent on nature and biodiversity 

Since risks associated with biodiversity loss aren’t fully captured in financial evaluations, professionals are limited in their ability to make informed investments.

Opportunity 2: Avoid nature and biodiversity related risk and position for opportunities prior to asset revaluations

In the scenario that assets are undervalued, early investors can capitalize on greater returns.

“It will allow people to set up and position themselves for opportunities that are not well captured given the lack of data,” explains Taylor.

Challenge 3: Lack of incentive for biodiversity investment

While the investment targets outlined in the Kunming-Montreal Global Biodiversity Framework are encouraging, there’s currently little incentive to compel investors into action, which disrupts the momentum of global investment.

Opportunity 3: Enhance brand positioning

Taking the initiative to commit to sustainable investing ahead of the potential adoption of favourable policies helps distinguish your brand as impact-driven.

Discover Concordia’s micro-certificate in Biodiversity conservation.