Tony Juniper: “The human economy is a wholly owned subsidiary of nature”

Investors should start to see biodiversity and nature positivity as integral parts of tackling climate change said Tony Juniper, speaking to Net Zero Investor.

Biodiversity is finally emerging as a priority for investors, but it is now high time to move to the implementation stage, Tony Juniper, chair of Natural England and author of multiple books on nature and biodiversity told Net Zero Investor on the sidelines of UBP’s Biodiversity Conference in London.

Juniper outlined three key challenges investors needed to address, from the decline in the abundance of nature, to mass extinction of animals to the destruction of ecosystems.

Global policy makers have outlined some significant commitments to addressing these challenges with the Montreal Framework, which lists 23 targets to tackle biodiversity loss. The framework commits 196 countries to implement the targets by 2030.

Poor policy track record

While Juniper acknowledged the Montreal Framework as a “major ambition”, he also warned that policy makers didn’t have the best track record on meeting their targets.

Indeed, in 2010 politicians adopted 20 goals in the Aichi Biodiversity Targets. However, to this date, none of them have been adopted globally.

“As we have seen in the past, it’s only as good as its implementation. It’s all very well having an international agreement, but if nobody does it then we’re back to square one” he warned.

He argues that a key reason why policy makers and market actors have performed so badly in meeting their targets it that they have “not aligned the ecological system with the economic system.”

He accused politicians of seeing economic growth and poverty reduction as more immediate, important things whilst accepting the destruction of nature as “regrettable but inevitable.”

Juniper challenged this by arguing that economic growth and the creation of welfare could not be achieved without considering their impact on nature: “The human economy is a wholly owned subsidiary of nature” he said.

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Demand for timberland

Juniper, who is also chair of the advisory committee for UBP’s Biodiversity Fund believes that the private sector has a key role to play meeting these targets. 

Pointing at the failure to implement the Aichi targets, he says: “This is why I’m thinking the private sector and financial organisations have an absolute critical role to play, this is not going to be done by government on its own.”

There are early indications that the tide on biodiversity might be turning. While biodiversity is still a relatively small niche in the wider ESG framework, the last two years have seen a surge in new nature positive strategies being launched, more than 70% of all biodiversity funds have been launched over the past two years and they cover a diverse range of asset classes from real assets to infrastructure to debt and equities.

But the investment case for biodiversity funds is complex. Strategies such as timberland have been performing well in a high-inflation environment. For example, the NCREIF Timberland Index is up more than 10% this year and timberland strategies are increasingly sought after by institutional investors.

Examples include APG Asset Management and the British Pension Protection Fund, who have a significant track record in timberland investment. DC master trust Nest is now on the lookout for a timberland manager and LGPS Pool London CIV also intends to launch a Natural Capital Fund in the new year.

In contrast, equity-focused biodiversity strategies such as UBP’s Biodiversity Restoration Fund, which invests in a concentrated high-conviction portfolio of global equities have struggled with performance. In H1 2023, it returned -2.6%. This performance is not surprising given that the fund invests in a range of small and mid-cap stocks covering sectors such as industrials and has less exposure to US tech stocks, which have largely driven global equity growth over the past few years.

Long-term case

But despite these short-term challenges, Juniper is convinced that for long-term institutional investors, there is still a strong case to invest in biodiversity assets.

“The long-term case for biodiversity is much clearer than the short-term case. If you want to have any economy or any society, protecting and restoring the web of life that sustains all of human activity is a fundamental dependence that anyone with a long-term interest should be buying into.

“Right now, if you want to make money quickly, you could go into oil and gas, but that is also the quickest way of destroying the planet” he warned.

“This is going to require people who take a view beyond short-term returns, we are trying to find ways of building long-term returns as well as rebuilding the health of the natural world, this should really resonate with long-term investors like pension funds.”

Juniper is also in favour of increasing disclosure standards on nature investing for asset owners such as TNFD reporting. “The more we open up the discussion by requiring transparency, that can only deepen the conversation.” This in turn could have a beneficial effect on performance: “Using better reporting to drive the performance has to be the priority” he stressed.

Also read:

Funding the wood for the trees: UK investors turn to timberland