Nature is in Crisis – But Focusing Sustainable Investment Research on More Than Just Deforestation May Help
It’s not enough to focus on deforestation when other ecosystems are at risk of collapse
By Sophie Griffith
Biodiversity is the global or local variety of all life on Earth, spanning genes, an estimated 8.7 million species, groups of different species, and the communities of living organisms (or ecosystems) they help form.
Our health and survival depend on biodiversity as it supports food security, energy, fresh water and air, and the development of medicines. Biodiversity is also good for business — its vast natural resources help maintain food supplies and keep commodity supply chains moving.
But biodiversity is being destroyed at an alarming rate — much of it in tropical hotspots such as forests. In 2019, this destruction led our Sustainability Research Team (SRT) to develop the Deforestation Pillar, one of Ethic’s 19 Sustainability Pillars designed to be dynamic and responsive to changes in research perspectives, data availability, and the evolving needs of wealth advisors.
The Deforestation Pillar helped wealth advisors evaluate companies on behaviors that led to deforestation. But after a periodic research review of the Ethic Sustainability Pillars in 2022, the decision was made to transition the Deforestation Pillar to the Biodiversity & Ecosystems Pillar. Learn why we made this transition, how it helps us focus on nature more broadly, and how it will help advisors help their clients make decisions that support both global impact and portfolio growth.
More Comprehensive Evaluations
In 2022, Amazon rainforest deforestation rates were at their highest in over a decade. Clearly, deforestation is a serious problem with many negative environmental, social, and commercial downstream effects. But deforestation is part of the much larger story of biodiversity, posing just one of many threats to the natural world.
Nature is in crisis. Marine pollution and overfishing are impacting ocean ecosystems; increased drought and desertification are affecting human health; and in 2022 alone, 66 species were declared extinct. But this is just the tip of the iceberg, as a whopping 1 million species stand on the brink of disappearing forever — primarily due to human activities such as mining, farming, and other unsustainable pursuits.
Think the disappearance of a single species doesn’t matter? Think again. A single species may have taken millions of years to evolve — when it disappears, it takes with it not only its unique genetic makeup but also its role as a critical part of an ecosystem. For example, without keystone species, which are organisms that have a disproportionately large effect on their environment, the ecosystem that depends on it could collapse or even disappear.
"The damage we are inflicting on species and ecosystems is so extensive and profound that scientists now believe we are witnessing Earth’s sixth mass extinction event — the last one marked the end of the dinosaurs." — Sir David Attenborough, Planet Earth, 2007
The mass extinction of species paints a doomsday scenario — but does the world need to go down a path of destruction? With our Deforestation Pillar, we were limited to evaluating a small set of company behaviors related specifically to deforestation. By looking at deforestation as just one aspect of the destruction of an ecosystem (overfishing, for example, impacts marine ecosystems), we now have a much broader scope through which to assess company behaviors and hold them accountable.
Using Research to Illuminate Nuances
By broadening the scope of the pillar, we can take a more nuanced approach to measuring the corporate behaviors that impact the natural world.
Take genetically modified organisms (GMOs). There is clear evidence that many GMOs are invasive species and can be extremely damaging to the ecosystems into which they are introduced. There is also the concern that using GMOs promotes monoculture farming, reduces biodiversity, and accelerates climate change. On the other hand, GMOs have also been cited as critical to sustainable farming and part of the solution to fight world hunger.
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Too often, the debate around GMOs is binary. They are deemed either good or bad, and therefore the companies that use or invest in them are either good or bad. But the issue is much more complicated. Research helps our SRT examine these nuances. Is the company meeting safety regulations? How much testing went into this organism while it was being developed, and what do we know about the effects on the local ecosystem?
The broader scope of the pillar will also help us use our research framework to consider industry-specific repercussions on biodiversity and ecosystems. For example, how will a real estate developer influence the surrounding environment? And what about a weapons production company? Each weapon type — including cluster bombs, landmines, and chemical and biological agents — impacts the environment in different ways. While our Deforestation Pillar didn’t examine the impacts of weapons production, the Biodiversity & Ecosystems Pillar can because warfare affects aquatic and land ecosystems other than forests.
Impact on Investors
None of the issues discussed above would have been addressed under the Deforestation Pillar. By broadening the scope of the pillar to all ecosystems and the biodiversity that sustains them and then applying our research framework to identify the various ways companies can impact these ecosystems, we believe that we’ll be able to provide more transparency to investors.
Nature is in crisis — but we believe that investing more sustainably can help us transition to a far less dystopian and far richer and biodiverse future. Our approach is unique because it gives investors a wider view of companies from an environmental perspective. And we fervently believe that companies making sustainable choices are better situated for the long run.
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