Blue Chip Issue 89

BLUE
CHIP
INVESTMENT | Responsible investment
Nature’s Dividend: investing with impact to
tackle the dual climate and biodiversity crises
Climate change and biodiversity loss are closely linked
and mutually reinforcing. As climate change alters
the habitats and ecosystems that support life
on Earth, biodiversity loss reduces the resilience
and adaptability of nature to cope with climate impacts,
perpetuating a vicious cycle that is having an increasingly
detrimental effect on the planet.
Biodiversity loss affects climate change by weakening the
capacity of nature to regulate the climate and store carbon. Forests,
wetlands and oceans are natural carbon sinks that absorb and
store large amounts of greenhouse gas emissions; however, when
these ecosystems are destroyed by human activities, as they are
currently, they release carbon into the atmosphere, contributing
to global warming.
The dual climate and biodiversity crises:
What it means for our future
The loss of biodiversity, be it through climate change and/or
human interference, poses very real threats to the health and
well-being of humanity. The World Economic Forum estimates
that more than half of the world’s GDP depends upon nature and
its services (including for water quality and disease control).. And
consider that more than a quarter of the global population already
experiences food insecurity. By 2025, half of the global population
will face water insecurity – and South Africa will not be exempt.
We will also have to deal with the increased spread of diseases as
population migration and density increases. Not to mention that
global heat records are being broken with alarming frequency. The
year 2023 is on track to become the hottest year ever recorded.
Globally, more than five-million people die each year because of
excessive temperatures. These are just some of what these crises
mean for everyday life
Investing for impact
Climate change is also influencing the financial world as asset
managers struggle to assess the impact of physical climate risks
on their investment portfolios. S&P Global Sustainable research
estimates that over 90% of the world’s largest companies have at
least one asset which is financially exposed to climate risks.
Business is taking action though. Currently, over 4,000
companies, covering over a third of the global economy’s market
capitalisation, having either set, or committed to setting, Paris
Agreement-aligned or Net Zero emissions targets via the SBTi
(Science Based Targets initiative). A very high proportion (of
these targets) are from listed companies in the developed world
including Europe, North America and Japan. This is impressive,
but we should also recognise that companies from these nations
should be doing this (and more) when you consider their
disproportionate national emissions. Four developed regions
– North America, Europe, Japan and Australia – are responsible
for around 53% of cumulative global CO2 emissions. Africa in its
entirety has contributed only 4.8%, with South Africa accounting
for approximately 1.5%.
The responsibility of remedying our biodiversity and climate
crises doesn’t rest entirely with companies. Investors have a key part
to play, too, by directing resources to where they’ll be managed
responsibly. Cue impact investing in the listed equity universe.
Developed market-listed equities provide the most viable way to
identify and mobilise significant amounts of capital into progressive
companies that are intent on generating positive impacts and
providing relevant solutions for a sustainable, more resilient future.
Through the mobilisation of such
capital, the market should reward
impactful companies with superior
share price appreciation. That is the
essence of impact investing.
There’s a perception around
impact investing that one must
sacrifice financial returns and
forego performance to do good.
This is not true. Impact investing
is a strategy that aims to generate
positive, intentional impacts in the
real economy alongside positive
financial returns by investing in the
best quality and most forwardthinking
companies that contribute
to solving social and environmental
challenges. This shared approach
to growing wealth while leaving
a positive footprint is one that
investors need to determinedly
champion if we are to avert the very
worst scenario of global warming
and its related impacts.
Considering how detrimental
both climate change and the loss
of biodiversity are to the economy
and our collective future, it’s time
we got serious about this.
Diane Laas, Global
Impact Fund Manager,
Melville Douglas
Rob Stewart, Global
Impact Fund Manager,
Melville Douglas
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