“The biodiversity is not sufficiently understood in its entirety by companies”

Ecofi aims to promote shared responsibilities in resource management in response to current environmental, social, and financial challenges. What observations led you to want to conduct a reflection on this theme?

The theme of our working group, essential resources, encompasses all the issues important to Ecofi, such as the just transition and social concerns. These are topics that resonate with the social and solidarity values upheld by our group, Crédit Coopératif. This theme aligns with a strong conviction at Ecofi: the necessity of linking SRI with responsible management of environmental, social, and financial resources. This cross-disciplinary approach is dear to us. We implement it in our investment processes through our PRISME methodology and in our engagement policy. It is also reflected in our thematic approach, which addresses challenges related to health, education, and water.

Regarding these issues, what should be the respective roles of public authorities, businesses, and financiers/investors?

Each stakeholder has a key role to play. Above all, at Ecofi, we believe that establishing dialogue with each of them is essential. We engage in discussions with companies, but also with political decision-makers. In particular, we are convinced that the development of regulatory frameworks is necessary, and their enforcement must be rigorous, even though it should not hinder business growth. For example, we recently signed a petition demanding more stringent corporate tax regulations in the United States. However, these efforts are not always successful. We consider it a failure, for instance, that in February, the European Commission published the Omnibus directive, which, among other things, reduced the ambition of the due diligence directive, which will now only cover direct suppliers. Similarly, the CSRD has been weakened, as 80% of companies that were supposed to be subject to transparency obligations will no longer be. Public authorities must be able to create incentive mechanisms to encourage citizens and businesses to adopt good practices. A reduction in taxes on second-hand product purchases, for example, could help curb overconsumption. We expect concrete initiatives from public authorities that are relatively simple to implement.

What do you think is the level of maturity of the economic world regarding biodiversity protection?

The level of maturity of all actors, both companies and investors, is comparable to the level observed with climate change about fifteen years ago. Today, objectively, we do not have reliable measures or consensus on indicators. Thus, the integration of biodiversity into investment processes is still not very structured. However, we have a lot of research on biodiversity loss, which is a real risk that companies must face. In this context, our exclusion criteria include companies involved in a significant controversy in this area. Likewise, since 2023, we have decided to integrate biodiversity into our engagement policy and contribute to the dialogue campaigns of the SPRING initiative, dedicated to this issue within the PRI. The lesson we draw from these actions is that companies tend to address biodiversity through very specific issues (pesticides, deforestation, plastic pollution, palm oil…), but biodiversity is often not considered in its entirety. We also regret that it is not yet a criterion for selecting suppliers. The approach is limited to ensuring compliance with regulations. For example, most companies aim to limit their impacts but have not yet committed to restoring biodiversity.

Have you identified good practices among the companies you analyze?

We have identified certain sectors where biodiversity issues are far more material than in others, such as textiles, energy, or mining. For these sectors, biodiversity-related criteria are significantly weighted in our ESG analysis. Companies in these sectors must have well-advanced practices to receive a satisfactory ESG rating. We have even developed our own indicators because we are not convinced by the existing ones. Among the companies in our portfolio, which naturally have more rigorous policies than average, we particularly appreciate Iberdrola’s strategy, which has successfully integrated biodiversity into its activities and governance with a holistic approach. Its risk management system includes this issue as one of its risks, analyzing its impacts, published by location, and dependencies. The Spanish energy company focuses its biodiversity strategy on restoration plans and corrective actions, not just on reducing negative impacts. It has also developed an internal biodiversity indicator (the “Corporate Environmental Footprint”), considering that the usual indicator, the MSA (Mean Species Abundance), did not meet its needs.

Content written by Florent Berthat.