As the COP16 conference on Biodiversity in Colombia is in full swing, we realise that investing in biodiversity presents challenges. As we wrote earlier, we want to explain in a few blogs how we can overcome these challenges. After all, investing in biodiversity is urgently needed and absolutely possible.
The first challenge has to do with the worrying state of global biodiversity. There is regular talk of the sixth mass extinction wave in which we currently find ourselves. Everything that lives in the soil, water, air and in between is under pressure.
For impact investing in biodiversity, this means that we need to get clarity about the objective. Do we want to reduce biodiversity loss or do we want to make a positive contribution to biodiversity? Given the strong negative trends that are currently in place, in some cases we will not be able to achieve better than mitigating the negative impact. It then helps to think in steps:
- Prevent negative impact
- Minimize negative impact
- Restore biodiversity
- Contribute to positive impact
The second question we can ask ourselves is how to make biodiversity investable in the first place. What type of investments contribute to preventing or reducing biodiversity loss or restoration and contribute to positive impact? And is there also a realistic and sustainable (in the sense of long-term) business model linked to this?
To answer this question, we at Impact Orange Partners went in search of investable themes that address the known causes of biodiversity loss. The main causes of biodiversity loss were identified by IPBES in 2019 and are:
- Destruction and change in land and sea use
- Pollution
- Overexploitation of natural resources
- Climate change
- Invasive species (plants, animals, organisms)
And our research shows that there are sufficient themes that combat these causes of biodiversity loss and that, in addition to a positive impact, can also generate an attractive return/risk profile:
Let’s take regenerative agriculture as an example. Regenerative agriculture focuses on nature restoration and the soil. A healthy soil, with everything that lives in it, strengthens productivity, resilience and water management. With minimal tillage, various crop rotations and natural fertilization, the use of pesticides and fertilizers can be avoided. After a few years it even results in many cases in a higher crop yield.
In fact, according to the German Ministry of Agriculture, implementing regenerative practices can lead to a 60% increase in profitability due to lower input costs, operational savings and greater resilience in difficult weather conditions.
However, the actual implementation of investments in these themes brings with it some other challenges. But we can also solve these and more about that in the next blog…