Over the last two months, there has been a 15% increase in the asset base of biodiversity funds according to an article by Natasha White of Bloomberg. This is a relatively new segment of the ESG market which saw a 150% increase in the number of funds last year.
Overall, biodiversity is a fraction of the overall ESG market with combined assets of $2.9 billion. To compare, the overall ESG market is estimated to have $41 trillion in assets. The largest biodiversity funds are from Northern Trust, Axa Investment Managers, and Lombard Odier. All three are based in Europe, where there is a more defined regulatory environment.
One catalyst for the asset class was the agreement at the COP15 summit in December of last year, where the Global Biodiversity Framework was signed by nearly 200 nations, with the intent to mobilize $200 billion annually to preserve and maintain biodiversity.
A challenge for the nascent fund class is the lack of standardized data on biodiversity which means there is disagreement on best practices and assessing impact. A larger issue is that many experts believe that the tradeoff between earning financial returns and maximizing biodiversity is too steep and thus can only be attained through public policy.
Finsum: Biodiversity funds have seen a 15% increase in assets over the last two months and a sharp boom in formation over the last couple of years. While there is agreement on the importance of preserving biodiversity, there are doubts whether it can be attained while generating positive returns for investors.