After having launched a burst of thematic funds specializing in climate, low carbon, water, forests, energy transition or the circular economy, asset managers are seizing a new and selling subject: biodiversity. According to the dictionary, this term designates “all living beings and the ecosystems in which they live”. How can this subject be translated into a choice of listed securities likely to appear in a portfolio that could generate performance?
The exercise turns out to be ambitious and complex in the face of fragmented data, as it is rarely published by companies. However, this theme is gaining momentum. According to Quantalys, fifteen collective investment vehicles (funds and ETFs) are labeled “biodiversity”, representing assets of 1.5 billion euros.
This category is embryonic with funds which, for the oldest, are less than three years old. It’s even a featherweight “faced with 180 funds and 65 billion euros of climate theme assets”, underlines Quantalys. Despite the little decline in performance, management companies positioned on this trendy theme are convinced that it is financially promising. “Nearly 50% of global GDP depends on preserved biodiversity”underlines Marie Walbaum, specialist in responsible investment at AXA IM.
These funds invest in two company profiles. First, the “pure players”, a term designating companies whose activity consists of developing “solutions”. These are breakthrough innovations intended to protect the planet, save natural resources or not pollute the soil. “This concerns sustainable agriculture, pollution prevention, sustainable water management and green construction”explains Pierre Schang, portfolio manager at La Financière de l’Echiquier.
Limit the impact on biodiversity
Few in number, these stocks are mainly small market capitalizations. More importantly, the other part of investment is transversal and appears more nebulous. It includes large listed companies qualified as “in transition”. For managers, these are those who, faced with the emergency, commit in their actions to “repairing nature”. Their ambition? Change over time their operation, their consumption, their supply with the sole aim of limiting their devastating impact on biodiversity.
“The fund managers detect and select companies positioned on this subject and also encourage them to develop their practices,” says Yann Louin, sales director of Pictet AM. “The trajectory and impacts are regularly evaluated against the initial objectives”adds Cyrille Collet, head of quantitative equity management at CPR AM.
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