Biodiversity and species coexistence

25/07/2022
mid year china outlook

Summary

The Japanese delicacy grilled eel on rice is a popular dish and the eel is an important source of nutrition for millions. However, due to overfishing, pollution and habitat loss, the supply of eels has drastically reduced in recent decades. Japanese eels have even been listed as an endangered species by the International Union for Conservation of Nature since 2016.

The Earth nurtures millions of lives, including more than 8 million species of plants, bacteria and animals, all interdependent and part of an enormous food web and ecosystem, also called “biodiversity”. Not only does this biodiversity provide basic living conditions for human beings, but it is also closely related to our access to natural resources like industrial raw materials and food that impact our long-term security, health and quality of life.

Food crisis led by a weakened ecosystem

Human activities and over-exploitation of natural resources has led to global warming and coupled with increasingly serious pollution, this level of harm to our ecosystem could trigger a biodiversity crisis. Global Assessment of Biodiversity and Ecosystem Services Report of IPBES, a research institution under the United Nations, pointed out that about one million species in the world are currently facing extinction1.

If the ecosystem collapses, it will pose one of the most disastrous threats to human society in the future. Taking food security as an example, the entire food chain will be weakened if humans continue to ignore the importance of biodiversity and focus only on cash crops. Large-scale crop failure will lead to a global food security crisis and more frequent famine and conflicts.

As early as 1963, the United Nations published the International Union for Conservation of Nature Red List of Threatened Species, specifying standards to communicate the urgency of species conservation to the public and policymakers and to assist the international community in preventing species from extinction. In recent years, leaders around the globe have also begun to realize this crisis. The 15th meeting of the Conference of the Parties to the United Nations Convention on Biological Diversity (COP15), the first summit held by international leaders discussing this topic, was held in Kunming, Yunnan last October. In December this year, the second phase of COP15 will be held in Canada and will continue to be led by China.

Now a concern of governments as well as environmentalists, biodiversity is inextricably linked with economic activities. In the New Nature Economy report published by the World Economic Forum in 2020, it suggested that about US$44 trillion, more than half of the total global GDP, is moderately or highly dependent on nature and ecosystems2 , such as grazing livestock is vital to developing countries.

According to the New Natural Economy report published by the World Economic Forum in 2022, up to 65% of China’s GDP may be affected by natural risks caused by the biodiversity crisis3. The loss of biodiversity can directly lead to a slump in agricultural production, disrupt the supply of raw materials, increase costs, and even cause operational difficulties. Biodiversity-related risks should therefore be incorporated into a company’s risk management strategy and related ESG disclosures.

Promoting biodiversity with green investments

Conversely, if we actively promote the development of biodiversity, it can benefit a vast variety of species, and create huge economic benefits. According to the World Economic Forum’s New Natural Economy report, by 2030, the business value of new industries such as sustainable fisheries, smart agricultural technologies, and smart buildings could reach US$10.1 trillion, while creating 395 million jobs4. In conclusion, environmental conservation and economic development are complementary and indispensable.

Data from The Nature Conservancy has indicated that the annual funding gap in reversing the biodiversity crisis is as high as USD 59.8 to 824 billion5 . In addition to relying on the resources of the government and environmental organisations, investors can also play a part in halting actions that endanger nature, seize attractive opportunities that create lasting benefits and usher in a better future.

1 Source: IPBES, research institution under the United Nations (The Global Assessment of Biodiversity and Ecosystem Services)
2 Source: The World Economic Forum (New Nature Economy Report Series)
3 Source: The World Economic Forum (Seizing Business Opportunities in China’s Transition Towards a Nature-positive Economy)
4 Source: The World Economic Forum (New Nature Economy Report II: The Future of Nature and Business)
5 Source: The Nature Conservancy (Financing Nature Reports)

There is no guarantee that actively managed investments will outperform the broader market. Environmental, Social and Governance (ESG) strategies consider factors beyond traditional financial information to select securities or eliminate exposure which could result in relative investment performance deviating from other strategies or broad market benchmarks.

Information herein is based on sources we believe to be accurate and reliable as at the date it was made. We reserve the right to revise any information herein at any time without notice. No offer or solicitation to buy or sell securities and no investment advice or recommendation is made herein. In making investment decisions, investors should not rely solely on this material but should seek independent professional advice. However, if you choose not to seek professional advice, you should consider the suitability of the product for yourself. Investment involves risks including the possible loss of principal amount invested and risks associated with investment in emerging and less developed markets. Past performance of the fund manager(s), or any prediction, projection or forecast, is not indicative of future performance. This material has not been reviewed by any regulatory authorities.

The crisis on our plates: finding potential in failing food systems

25/07/2022
mid year china outlook

Summary

The war in Ukraine has highlighted that the current way of producing and consuming food is unsustainable. As the rising global population places greater demands on our food system, there is an urgent need to build a resilient and inclusive food ecosystem, meeting both planetary and social needs. Opportunities exist for investors across the value chain of global food production and distribution to help mitigate these risks.

Key takeaways

  • As highlighted by the invasion of Ukraine, pressures on the global food system are reducing availability, affordability and resilience
  • A radical rethink is required to sustain rising populations and increasing consumption in a way that is fair to all, without simply producing more food
  • A long-term view is crucial but complex, and the recent stresses on food systems have amplified the need for investors, businesses and policymakers to act

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