Many investors today are balancing competing demands by incorporating both climate and biodiversity considerations into their portfolios. Over the long term, we expect that both government policy and social expectations will grow so that investors and corporations take account of how we are maintaining and improving the natural environment, including improving biodiversity, water scarcity and habitat destruction.
We believe that a key starting point for achieving this balance is revisiting sustainability beliefs and policies, particularly as nature and biodiversity are intrinsically linked to climate change. Incorporating nature-positive practices not only helps prevent unintended environmental damage but also enhances long-term returns. For example, nature-based solutions, such as restoring forests and wetlands, offer carbon sequestration benefits, contributing to net-zero goals while creating investment opportunities.
To address these complex demands, investment stewardship is key. Engagement-oriented investors should ensure that their asset managers are engaging with companies on nature-related issues, such as biodiversity risks and climate impacts. Frameworks like the Taskforce on Nature-related Financial Disclosures (TNFD) guide investors in holding companies accountable, particularly in sectors critical to environmental sustainability.
Investors should consider the investment case for funds focused on sustainable agriculture, forestry, and ocean conservation, which are designed to improve natural capital, an economic term for the services and resources such as pollination that nature provides for free. Globally most agricultural activities focus on three crops wheat, rice, and maize, which are grown in monocultures – fields of genetically similar or identical plants, where the same plants are planted year after year.
However, solutions to these challenges such as regenerative agriculture, vertical/indoor farming, cold storage, precision fermentation, and biotechnology R&D all present compelling investment opportunities over the long term.
