We are pleased to present a recap of our most recent BwB Talk Series with Jordan Patel.
Jordan Patel is a Senior Investment Analyst in Impact & Sustainable Investing at Federated Hermes. Jordan presented at the latest BwB Talk Series, introducing a Biodiversity Strategy. The BwB Talk Series is where we bring innovative leaders in impact, finance, and the environment to speak with our network around the world. The BwB Talk Series helps generate new ideas for our network by bringing experts to share their deep knowledge of sustainability topics.
“The thesis is simple – biodiversity loss is a major risk to life as we know it on the planet,” said Jordan Patel. “This is becoming increasingly recognized by governments, intra-governmental organisations, corporations, consumers and other stakeholders; and we see an additive secular growth opportunity in the companies which provide solutions to loss or mitigation in operations. We believe that those companies are likely to outgrow the market, benefit from regulatory changes, and to some extent command a premium over peers as more investors pay attention to this issue. In short, these are exactly the kind of companies we want to own.”
Core takeaways from the talk with Jordan Patel included:
The key ecological concepts of “Biodiversity” and “Ecosystem services”. These concepts contextualise the importance of the new Biodiversity Equities Fund. The term “biodiversity” is an ecological concept that refers to the variety of life on Earth at all its levels, from genes to ecosystems. High biodiversity is desirable because it provides stability and resilience in our natural systems. “Ecosystem services” refers to the many and varied benefits to humans provided by the natural environment and from healthy ecosystems. We depend on biodiversity and ecosystem services to create the foundation of our economies and societies - and both are valued in the trillions, or 1.5 times the value of the global GDP. Human activity, at present, is severely destructive to both biodiversity and ecosystem services.
The relevance to companies and investments. Investors and businesses have a large role to play in mitigating biodiversity loss through conducting assessments, addressing the drivers of biodiversity loss, and committing to having a net-positive impact through their operations/supply chain. At present, there is an 800bn/year funding gap within the biodiversity theme, with governments and NGOs contributing the largest share, therefore mobilsing private capital is crucial to securing a biodiverse future. One way the materiality of biodiversity in investment is being addressed at Federated Hermes is through the Biodiversity Equities Fund. There is a large unmet need for a product that allows investors to gain access to companies that provide biodiversity solutions or mitigate biodiversity risk in their own operations, and this fund does just that.
Introducing the Biodiversity Equities Fund. This fund was launched in 2022 and focuses on biodiversity, with investment in companies that either (a) provide solutions to biodiversity risk, or (b) mitigate the loss of biodiversity in operations. The multi-stage screening process of the Biodiversity Equities Fund involves assessing potential investment companies using 6 investible themes linked to biodiversity. Within each of these themes, a list of industry sub-verticals which contain potential investment opportunities are created. The final output from the process is a much shorter list of “watchlist companies” from which the most appealing opportunities from a financial, valuation, and business quality perspective are added to the portfolio.
An interesting Q&A segment followed the talk. One of these moments was a question on the Biodiversity Equities Fund. When asked by BwB’s Rufus Grantham about the potential evolution of the fund, building on a potential increase in equities represented in it, Patel stressed the need for a tradeoff between the size of the investment universe and the application of the principles during investments. While the high constraints of Impact and biodiversity forced them to limit the size of the investable universe, the diversity of the businesses across sectors appears to be wide. He then stressed that the focus on liquid equities prevents the growth of the fund from being limited over time, with an increasing number of companies joining the fund. He concluded the intervention stating: “We are investing in biodiversity not just because it sounds good – but because it will outgrow the market as governments and consumers change the landscape through regulations and demands. That encourages companies to develop into these areas, it is an exciting time for us.”
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Bankers without Boundaries, an innovator in finance, is a not for profit powered by former investment bankers to assist high impact projects that benefit the environment and social good. BwB works with local and sub- and national governments, cities, institutions, and foundations to mobilize capital advisory and research services. BwB applies financial concepts and structuring to public projects to align them with the investment needs of capital markets, thinking about risk reduction, scaling and generation of financial returns alongside broader positive co-benefits and impacts. To learn more about Bankers without Boundaries and our work, visit https://www.bwbuk.org.