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:
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.
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.
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.
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.
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.
1 Source: 2019 Global Assessment Report on Biodiversity and Ecosystem Service
2 Source: Global Futures report from the World Wild Fund for Nature (WWF)
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