Biodiversity is not something that the pensions industry can wait for regulations on and it has “failed” if it postpones action in anticipation of future regulation, according to Van Lanschot Kempen Investment Management chief investment officer, Nikesh Patel.

Addressing the Pensions and Lifetime Savings Association (PLSA) ESG Conference, Patel argued that biodiversity was something that needs to be on the industry’s agenda now and in 2024, and that regulation in this area was a sign of “deeply disappointing” inertia.

He told attendees there were things that can be done now, which are already consistent with the steps being taken in other parts of pension scheme portfolios, to address the biodiversity crisis.

“With climate, we’ve all been hoodwinked into thinking it’s about one number: Carbon emissions and the ton of carbon you’re trying to reduce,” he stated.

“A ton of carbon in the UK is the same as a ton of carbon in China. Biodiversity is not like this. A square kilometre of Brazilian rainforest is orders of magnitude more important than a square kilometre of the Canadian wilderness.”

Patel said that biodiversity investments can be approached in a very similar way to climate investing.

On listed strategies, he believed that most were failing to realise how important listed markets were to the biodiversity crisis.

“Listed strategies can achieve two things, and are certainly easier to align with fiduciary duty conversations,” he noted.

“The first thing you can do in a listed strategy is engage. This is enormously understated as a tool. Engagement on biodiversity can be as simple as telling a company what not to do.

“That can be far more impactful than any of the high-tech solutions you can invest in; simply protecting certain parts of the world: Don’t burn down that part of the Brazilian rainforest, protect those East African mangroves.

“Adding on one more question to asset managers to ask them what they’re doing on biodiversity should not be a challenge and it will encourage the right behaviour from them.”

Patel also urged pension investors to get involved in the smaller end of listed markets, noting that investments can be made in smaller-cap solutions with companies that develop certain technologies, such as waste water cleaning technology.

“These things might sound small, but those companies will be winners in the same way that whoever solves the problem of flatulent cows will be winners in the climate crisis,” he continued. “There is enormous potential to pick winners as a result of the biodiversity crisis.

“In the private markets, there are endless possibilities for private equity, venture, real estate, infrastructure, forest and land. Make sure when you look at these opportunities in private markets, like forestry, you dig deep and say, ‘what part of the return is from the activity that I want’.”

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