COP 15: Global Biodiversity Framework elevates nature-related risks and opportunities
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COP 15: Global Biodiversity Framework elevates nature-related risks and opportunities

In December 2022, after multiple Covid-19-related delays, the conclusion of the COP 15 conference in Kunming, China, saw the agreement of a 2030 Global Biodiversity Framework which aims to halt and reverse nature loss by 20301.
Given the complexity of biodiversity, the agreement lacks an overarching rallying point equivalent to the 1.5 degree target of the 2015 Paris Agreement. However, it does include 23 goals addressing the five drivers of biodiversity loss identified by the Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES): land use change, pollution, over-exploitation of resources, invasive species, and climate change. Among the goals are protecting 30% of global land and sea area by 2030, reducing pollution from fertilisers and pesticides, halving food waste and reforming harmful subsidies.
Countries will now develop and implement biodiversity action plans to respond to these goals prior to the next COP in 2024. While the 23 goals have varying degrees of potential materiality for companies and investors (Figure 1), we anticipate that the overall impacts from the agreement will materialise in three ways. First, it will increase attention on companies’ negative impacts on nature, whether through waste, plastics, chemicals, deforestation or otherwise. Second, it will increase national-level regulation, subsidies and programs in support of COP 15 goals. And third, it will ramp up the focus on new financing and investment mechanisms for biodiversity and conservation.
Given the close inter-relationship between nature and food production, we believe some of the most material impacts from COP 15 will be around the food system. A drive to restore degraded land and nearly double the area under conservation, while reducing negative impacts from harmful pesticides and fertiliser pollution should impact the sustainable food transition, as outlined in our Responsible Investment Q3 2022 article2. This could be a catalyst for companies involved in research and development (R&D) on products that can increase resilience to climate and water stress, improve productivity and efficiency in food systems, and decarbonise food production.
However, as with any global non-binding agreement, the proof will lie in its implementation. We note that many of the goals are yet to define the data, baselines and definitions that will be used. The outcome of these and the subsequent implementation at a national level will ultimately determine the ambition and impact of the COP 15 framework.
Highlights of some of the goals and our initial assessment of the potential implications for investment are included in the table below.

Figure 1: implications of select key targets in the 2030 Global Biodiversity Framework3

Figure 1 - implications of select key targets in the 2030 Global Biodiversity Framework

Food & Materials transition engagement: Food security and biodiversity

Company: Tesco

Sector and country: Retail, United Kingdom

Why we engaged ?

Tesco is a significant holding and we have had an ongoing engagement with the company on a range of sustainability issues. Earlier in 2022, we identified Tesco as having relatively weak disclosure on nature relative to its risk exposure on the theme.

How we engaged ?

We had a small group meeting with the Head of Environment and Sustainable Agriculture in December 2022 on developments related to Tesco’s nature strategy. 

What we learnt ?

  • Nature and biodiversity are emerging themes and although Tesco’s work in this area is under development, their efforts to date are promising. In particular, Tesco is funding and piloting a location-based mapping tool with Worldwide Fund for Nature (WWF) that will provide an insight into nature risk among suppliers (e.g. vulnerability to water scarcity, soil degradation, or pollinator decline). Innovatively, this exposure data can be overlaid with environmental impact data and with suppliers’ scope 3 emissions. Considering risk and impact together will enable Tesco to identify “hotspots” where it can focus its efforts on. Roll out will start with dairy, then fresh produce, and eventually grains and commodities.
  • Commodity traceability on deforestation is a work in progress. Despite putting a lot of resource towards traceability, Tesco underlined the scope of the challenge given their vast supplier network, different regulatory approaches being taken between the UK and Europe and systemic issues with opaque commodity supply chains.
  • Soy is the company’s biggest exposure to deforestation risk. Currently, there is only a small volume of fully traceable soy and it is pursuing multiple avenues to try and improve supply. Collaboration on a pre-competitive basis is key and Tesco has been involved in leading several initiatives.
  • Tesco will be among the first to pilot report on TNFD.

Outcome

We were reassured as to the depth of Tesco’s approach to nature in operations and in supply chain including the innovative supplier mapping work with WWF. In our view, further effort to reduce sourcing impacts will build on Tesco’s leadership on demand-related aspects such as food waste and sales of plant-based products. Traceability remains a challenge, particularly for key commodities such as soy. We will continue to monitor progress on this at Tesco and across the sector in light of the incoming EU legislation.

1 marzo 2023
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COP 15: Global Biodiversity Framework elevates nature-related risks and opportunities

1UN Environment Programme, COP 15 ends with landmark biodiversity agreement, 20 December 2022
2Responsible Investment Quarterly Q3 2022, Food security challenges put spotlight on sustainable transition, November 2022
3All data in the table: https://www.unep.org/events/conference/un-biodiversity-conference-cop-15
4The mention of specific companies is not a recommendation to deal

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For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). This is an advertising document. This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services.

Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. Risks are enhanced for emerging market issuers.

The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed reflect those of the respective contributing parties are as of the date given, may change as market or other conditions change and the parties disclaim any responsibility to update such views, and views expressed herein may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. The views expressed are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, so actual outcomes and results may differ significantly from the views expressed. This information may not be relied upon as an indication of trading intent on behalf of any fund, other investment product or strategy, is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be appropriate for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either.

Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This is an advertising document. This document and its contents have not been reviewed by any regulatory authority.

In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) and relies on Class Order 03/1102 in respect of the financial services it provides to wholesale clients in Australia. This document should only be distributed in Australia to “wholesale clients” as defined in Section 761G of the Corporations Act. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.

In Japan: Issued by Columbia Threadneedle Investments Japan Co., Ltd. Financial Instruments Business Operator, The Director-General of Kanto Local Finance Bureau (FIBO) No.3281, and a member of Japan Investment Advisers Association and Type II Financial Instruments Firms Association.

In the USA: Investment products offered through Columbia Management Investment Distributors, Inc., member FINRA. Advisory services provided by Columbia Management Investment Advisers, LLC.

In the UK: Issued by Threadneedle Asset Management Limited. Registered in England and Wales, Registered No. 573204, Cannon Place, 78 Cannon Street, London EC4N 6AG, United Kingdom. Authorised and regulated in the UK by the Financial Conduct Authority.

In the EEA: Issued by Threadneedle Management Luxembourg S.A. Registered with the Registre de Commerce et des Societes (Luxembourg), Registered No. B 110242, 44, rue de la Vallée, L-2661 Luxembourg, Grand Duchy of Luxembourg.

In Switzerland: Issued by Threadneedle Portfolio Services AG, Registered address: Claridenstrasse 41, 8002 Zurich, Switzerland.

In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). For Distributors: This document is intended to provide distributors’ with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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Important information

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). This is an advertising document. This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services.

Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. Risks are enhanced for emerging market issuers.

The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed reflect those of the respective contributing parties are as of the date given, may change as market or other conditions change and the parties disclaim any responsibility to update such views, and views expressed herein may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. The views expressed are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, so actual outcomes and results may differ significantly from the views expressed. This information may not be relied upon as an indication of trading intent on behalf of any fund, other investment product or strategy, is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be appropriate for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either.

Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This is an advertising document. This document and its contents have not been reviewed by any regulatory authority.

In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) and relies on Class Order 03/1102 in respect of the financial services it provides to wholesale clients in Australia. This document should only be distributed in Australia to “wholesale clients” as defined in Section 761G of the Corporations Act. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.

In Japan: Issued by Columbia Threadneedle Investments Japan Co., Ltd. Financial Instruments Business Operator, The Director-General of Kanto Local Finance Bureau (FIBO) No.3281, and a member of Japan Investment Advisers Association and Type II Financial Instruments Firms Association.

In the USA: Investment products offered through Columbia Management Investment Distributors, Inc., member FINRA. Advisory services provided by Columbia Management Investment Advisers, LLC.

In the UK: Issued by Threadneedle Asset Management Limited. Registered in England and Wales, Registered No. 573204, Cannon Place, 78 Cannon Street, London EC4N 6AG, United Kingdom. Authorised and regulated in the UK by the Financial Conduct Authority.

In the EEA: Issued by Threadneedle Management Luxembourg S.A. Registered with the Registre de Commerce et des Societes (Luxembourg), Registered No. B 110242, 44, rue de la Vallée, L-2661 Luxembourg, Grand Duchy of Luxembourg.

In Switzerland: Issued by Threadneedle Portfolio Services AG, Registered address: Claridenstrasse 41, 8002 Zurich, Switzerland.

In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). For Distributors: This document is intended to provide distributors’ with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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