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Impact Opportunities: investing to limit biodiversity loss

21 Jan, 2021 | Return|

By the Impact Opportunities Equity Team, Federated Hermes

Nature is critical for human existence, but it is under increasing stress – because of us. Human activity, such as consumption, eating habits and energy needs, has altered almost 75% of the earth’s surface. Forests are declining at an alarming rate owing to agricultural expansion and climate change, while almost 1m animal and plant species are threatened with extinction1. According to the WWF’s Living Planet Report 2020, global wildlife populations fell by 68%, on average, between 1970 and 2016, with some Australian populations plummeting by up to 97%.

It is estimated that damage to our ecosystems and the associated loss of biodiversity could cost the global economy $10tn by 20502 . For many, the coronavirus has acted as a wake-up call: we cannot continue our current relationship with nature. Now more than ever, investors must take action to consider the impact of their investments.

Several of our impact themes seek to reduce our impact on nature and therefore help to conserve biodiversity, particularly through the reduction in material and water usage and greenhouse gas emissions. These themes are also inextricably linked to the prevention of climate change. They include:

Energy transition

Renewable energy helps to reduce the depletion of non-renewable resources – and it reduces air pollution and cuts carbon dioxide emissions too. Within this theme, our portfolio holdings include US-based specialty finance firm Hannon Armstrong, Spanish wind turbine manufacturer Siemens Gamesa Renewable Energy, and Danish wind power group Ørsted.

Future mobility

Intuitive, cleaner and connected vehicles can help to reduce pollution and the consumption of fossil fuels. Exposure in our portfolio includes German car parts supplier Hella and Belgian battery-materials manufacturer Umicore.

Water

Freshwater ecosystems are among the most degraded and threatened ecosystems at the global scale. Two of our holdings, Xylem and Ecolab, provide products and services that help to preserve our water ecosystem, such as helping to reduce water usage by implementing more water-efficient processes. Several of our impact themes seek to help conserve nature and biodiversity.

Circular economy

Reusing and recycling helps to lessen our usage of new materials and reduce waste. These practices can also lower pollution by decreasing energy, electricity, and water consumption and the need for landfills. Our exposure ranges from pallets and container maker Brambles to the world leader in reverse vending, Tomra.

Impact enablers

Providing solutions that help to improve processes (e.g. software and technology), can reduce material usage, cut pollution and enable sustainable production. We hold Ansys, an engineering simulation software company, and Lonza, a speciality chemical services company, in our portfolio.

To find out more, including a closer look at two of our portfolio case studies, take a look at the Federated Hermes Impact Opportunities Equity Report.

 

Source: 2019 Global Assessment Report on Biodiversity and Ecosystem Service

Source: Global Futures report from the World Wild Fund for Nature (WWF)

 

The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. Any investments overseas may be affected by currency exchange rates. Past performance is not a reliable indicator of future results and targets are not guaranteed.

For professional investors only. This is a marketing communication. It does not constitute a solicitation or offer to any person to buy or sell any related securities, financial instruments or financial products. No action should be taken or omitted to be taken based on this document. Tax treatment depends on personal circumstances and may change. This document is not advice on legal, taxation or investment matters so investors must rely on their own examination of such matters or seek advice. Before making any investment (new or continuous), please consult a professional and/or investment adviser as to its suitability. Any opinions expressed may change. All figures, unless otherwise indicated, are sourced from Federated Hermes. All performance includes reinvestment of dividends and other earnings.

Federated Hermes refers to the international business of Federated Hermes (“Federated Hermes”). The main entities operating under Federated Hermes are: Hermes Investment Management Limited (“HIML”); Hermes Fund Managers Ireland Limited (“HFMIL”); Hermes Alternative Investment Management Limited (“HAIML”); Hermes Real Estate Investment Management Limited (“HREIML”); Hermes Equity Ownership Limited (“EOS”); Hermes Stewardship North America Inc. (“HSNA”); Hermes GPE LLP (“Hermes GPE”); Hermes GPE (USA) Inc. (“Hermes GPE USA”) and Hermes GPE (Singapore) Pte. Limited (“HGPE Singapore”). HIML, and HAIML are each authorised and regulated by the Financial Conduct Authority. HAIML and HIML carry out regulated activities associated with HREIML. HIML, Hermes GPE and Hermes GPE USA are each a registered investment adviser with the United States Securities and Exchange Commission (“SEC”). HGPE Singapore is regulated by the Monetary Authority of Singapore. HFMIL is authorised and regulated by the Central Bank of Ireland. HREIML, EOS and HSNA are unregulated and do not engage in regulated activity.

In the European Economic Area (“EAA”) this document is distributed by HFMIL. From 1st January 2021, new contracts with potential investors based in the EEA for a segregated account will be contracted with HFMIL.

Issued and approved by Hermes Investment Management Limited which is authorised and regulated by the Financial Conduct Authority. Registered address: Sixth Floor, 150 Cheapside, London EC2V 6ET. Telephone calls may be recorded for training and monitoring purposes. Potential investors in the United Kingdom are advised that compensation may not be available under the United Kingdom Financial Services Compensation Scheme.

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