In France, the Asset Management division of the world’s 7th-largest bank—BNP Paribas—has launched the BNP Paribas Ecosystem Restoration Fund.
The new strategy is managed by Edward Lees and Ulrik Fugmann, who also oversee the recently soft-closed BNP Paribas Energy Transition fund and the long/short BNP Paribas Environmental Absolute Return Thematic (‘EARTH’) fund.
The BNP Paribas Ecosystem Restoration fund will have 40-60 holdings selected from 1000 global companies focused on aquatic, terrestrial and urban ecosystem restoration.
It will focus on the follow three main areas:
- Aquatic ecosystems: water pollution control, water treatment and sustainable packaging, aquaculture, efficient irrigation systems and flood control solutions;
- Terrestrial ecosystems: technologies relating to alternative protein, sustainable agriculture, forestry and plantations; and
- Urban ecosystems: environmental services, green buildings, recycling, waste management and alternative modes of transport.
The investment universe is diversified by geography, size and sector, with technology, industrials and materials well represented.
Looking for different opportunities
Lees said that—while decarbonization and natural capital preservation are connected—they still have to be looked at separately, with US President Biden’s plan focusing on broader environmental concerns, for example.
“We’re starting to see regulatory bodies focusing on natural capital too. We’ve had the Task Force for Climate-Related Financial Disclosure, which is now followed by the Task Force for Nature-Related Financial Disclosures,” he explained.
Lees said you can’t really find publicly-listed biodiversity companies, which means fund managers need to do additional work to find ways to have positive outcomes.
The BNP Paribas Ecosystem Restoration portfolio will have between 50%-60% of pure play companies. “It’s important to be diversified on that metric as well,” Lees added.
“A lot of the pure plays tend to be smaller companies, and you don’t want to have a portfolio that completely consists of them from the risk standpoint,” he added.
Although the managers are not invested in unlisted names, they are constantly monitoring private markets for opportunities, and are currently helping two firms to go public in the coming months.
“Trying to bring them to the market is something that we had early conversations about with the management teams of both of these companies. Those will be the instances when we will be giving money to a management team to actually accelerate their build out and grow their products,” Lees said.
A big part of what the fund managers will be doing is engagement with invested companies, be it with a forestry company that needs a better replanting and certification process or a chemical company that needs to cut its carbon footprint.
The team recently engaged with a fish farm company to incentivize them to start using more renewable power and install solar panels on the roof.
“We also mentioned to them another company in our portfolio, which is developing innovative algae-based fish food, which is more sustainable and mitigates negative impact on the ocean,” Lees continued.
Push for better data
BNP Paribas AM said the Ecosystem Restoration fund is part of its biodiversity road-map announced in May, which includes research aimed at accelerating the development of biodiversity measurement indicators and establishing a common reporting framework.
BNP Paribas AM has recently entered into partnerships with CDP and Iceberg Data Lab and I Care & Consult to promote transparent, high quality and standardised corporate biodiversity data reporting.
Lees explained: “Half the world’s GDP is dependent on natural capital and our consumption of it is taking place 1.75 times as fast as the earth can regenerate it, while global population growth and rising incomes are leading to increased demand, which adds up to an urgent need to restore damaged ecosystems.”
“The financial sector has a critical role to play in creating a positive environmental impact and we are proud to have launched BNP Paribas Ecosystem Restoration to support the work of the UN and others in doing this,” he concluded.