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December 21, 2010
Business Falls Short on Policies Addressing Biodiversity
    by Robert Kropp

A report from EIRIS suggests that the optimism of the COP 10 agreement on biodiversity will be premature until business is involved, and recommends that investors pressure companies to contribute to solutions.

The tenth meeting of the Conference of the Parties (COP 10), held in October in Nagoya, Japan, was attended by representatives of the 193 parties to the Convention on Biological Diversity (CBD) in a year proclaimed by the United Nations as the International Year for Biodiversity (IYB).

According to a
press release, "A new era of living in harmony with Nature" was achieved at COP 10, as the parties adopted "historic decisions that will permit the community of nations to meet the unprecedented challenges of the continued loss of biodiversity compounded by climate change." The measures agreed upon at the Conference "will ensure that the ecosystems of the planet will continue to sustain human well-being into the future," the release continued.

Responding to such an optimistic outlook,
EIRIS has published a report entitled 'COP' Out? Biodiversity loss and the risk to investors, in which it argues, "The lack of formal involvement of businesses in international negotiations such as in Nagoya continues to be a hindrance to progress."

The annual cost of biodiversity loss has been estimated by
Economics of Environment and Biodiversity (TEEB) to be between two and 4.5 trillion dollars. Furthermore, 18 years after the formation of CBD, the UN Global Biodiversity Outlook "has delivered dire conclusions that degradation has not halted, and in many cases has increased further," EIRIS found.

In its report, EIRIS assessed 1,800 companies in the FTSE All-World Development (AWD) Index, and found that 58% of them operate in industry sectors that have considerable impacts on biodiversity. "However," EIRIS concluded, "Only 6% of these high impact companies are assessed by EIRIS as having a good policy on biodiversity."

Although both high and medium impact companies have, in general, poor biodiversity policies, companies in the high impact sector of Forestry and Paper display "the most advanced approach to biodiversity protection," EIRIS found. Among the companies cited by EIRIS as having a good policy is the US-based International Paper. Medium impact companies in the Property Development and Chemicals and Pharmaceutical sectors were identified by EIRIS as laggards.

Large-cap companies in high impact sectors perform better than their mid-cap counterparts, as 16% of such companies were found by EIRIS to have good policies, compared to eight percent in the FTSE AWD.

In a statement, Carlota Garcia-Manas, Head of Research at EIRIS, said, "Investors should take steps to understand the systematic risks that biodiversity loss represents to their investments." The report recommends that investors focus on unmanaged risk in corporate supply chains, especially among medium impact industry sectors.

Investors should also encourage companies in their portfolios to uphold the principles of CBD, pressure companies to adopt voluntary stewardship schemes, and collaborate with other investors on the issue of biodiversity.


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