The creation of a thematic fund ‘Tocqueville Biodiversity SRI’, La Banque Postale Asset Management

Published on 2023/01/07 11:02

Sophie Baumeyer (S.B): At La Banque Postale AM you have designed a fund on the theme of biodiversity. Can you explain why? 

Guillaume Lasserre (G.L): There are two main reasons. The first, which should not be underestimated, is linked to new regulations. In France, the latest ‘Energy-Climate Law’, and in particular Article 291, places particular emphasis on biodiversity. The second is our experience and expertise in environmental issues. It made sense to launch a biodiversity equity fund, supported by our extra-financial analysis capabilities.   

Biodiversity issues are extremely complex. As financiers, we needed an approach that could put this scientific complexity into perspective, from our perspective as asset managers. We start from the conclusions of the IPBES, the biodiversity equivalent of the IPCC, in order to understand the scientific issues and make the link with economic activities. Ultimately, investment is a lever that helps to reduce the negative impact of these activities on natural ecosystems.      

S.B: What methodology is used to assess the pressures on biodiversity? 

G.L: The term ‘pressure’ on biodiversity is understood to mean the destruction of biodiversity.   So the first step is to mitigate the pressures identified by the scientific community. The question of restoring ecosystems comes second.  

The regulations are not yet fixed, although one of the six pillars of environmental taxonomy concerns biodiversity. We hope to obtain clarification in the coming quarters. In the meantime, we have built our own analysis model to measure the pressures exerted by the various sectors of activity. To do this, we are using a database hosted by a UN body: ENCORE. 

S.B: Can you give us a concrete example? 

G.L: A concrete example concerns pollution. Let’s take plastic pollution: how do we make the link between microplastics, their pressure on biodiversity and the sectors of activity involved? Our methodology starts by identifying the companies that use a lot of packaging in their business. Typical examples are major retailers and companies in the agri-food sector.   

The second step is to measure the intensity and severity of the pressure exerted. Measuring this level of pressure is not so easy, as the measurement indicators in this area are relatively recent. At LBP AM we have chosen to use the so-called ‘MSA square kilometre’ measure (‘MSA’ stands for ‘measure of average species abundance’), which seems to be the most widely used today.    

S.B: You use the Global Biodiversity Score (GBS). Can you tell us a bit about it?   

G.L: This is a tool that enables us to obtain the biodiversity footprint (MSA square kilometre), which is useful for assessing the pressure exerted by a company on ecosystems. The theoretical foundations of this tool were developed by CDC Biodiversité and it is supplied by Carbone4 Finance. While it is very important to obtain orders of magnitude, a number of complexities remain. It is still difficult to obtain a measure that aggregates all biodiversity issues. For example, it is difficult to reconcile the impact on aquatic environments with the impact on terrestrial environments. 

Finally, the specific nature of the subject must be taken into account. Unlike the carbon footprint, which has a wider impact (one molecule of carbon in the atmosphere has a diffuse, global impact), the destruction of biodiversity is usually local. We also need to consider the accumulation effect: measuring the footprint by adding the stock of biodiversity destroyed in the past to that which will be destroyed in the coming year. A better understanding of all these aspects helps investors to direct their capital more effectively.     

S.B: How do you monitor the commitments made by the companies in which you decide to invest?  

G.L: Today, our strategy is based on three selection factors:  

-identifying companies that are developing solutions that will put less pressure on biodiversity ; 

-selecting companies whose business model is focused on biodiversity;    

-not to exclude companies which potentially have problems with biodiversity but which have also developed internal solutions.  

With regard to the last choice, let’s take an example: a giant in the agri-food sector is experiencing problems with plastic packaging. This is a structural problem, but because the company is also in the agricultural sector, it is developing regenerative farming techniques. It is this ability to develop solutions that will be the focus of our analysis. Here we come back to the idea of transition, which is well known when we talk about the climate. As investors, we have three major means of action: exclusion, selection and shareholder engagement. The latter plays a very important role for companies in transition.   

S.B: You are one of the most advanced management companies in this field. Why is that?  

G.L: There is a high cost of entry today, which implies an ability to allocate resources and a significant amount of human time. Addressing the issue of biodiversity, where the available data is still patchy or rare, requires time and the ability to collect and process information. In this respect, the use of proven automatic reading technologies facilitates the processing of data from multiple information sources and semantic universes associated with biodiversity.    

S.B: What’s the next step?  

G.L.: The next important step is to identify relevant future data. The CSRD (Corporate Sustainability Reporting Directive), which requires companies to report a large amount of extra-financial data, will be a great help.