Eva: Hello, everyone. I'm Eva Cairns, Head of Sustainability Insights and Climate Strategy at abrdn and I'm pleased to be your host for today.

You're listening to the abrdn Sustainable Investing podcast discussing all things relating to sustainable and responsible investing. And I'm delighted to introduce our guest for today Anne Meoni, Anne is a Senior Analyst within the Investment Sustainability Group at abrdn and leads on developing our insights, views and approaches related to nature. This includes thematic and sector research, engaging with companies, sourcing and analysing data and collaborating with peers and industry associations, Anne also supports the research for impact investing strategies, which aim to allocate capital in line with the United Nations Sustainable Development Goals

Anne joined the firm's Corporate Sustainability team as Environmental Manager in 2013 and moved to the Sustainability Team within our investments vector in October 2021.

Before this, you had a number of environmentally focused roles across a range of sectors including food and drink, industrial symbiosis and waste management. Her academic qualifications include an MSC from the University of Edinburgh in Environmental Protection and Management, and a BSc in Geology. Outside of work, Anne loves travelling to Italy with her Italian husband and two children. Anne it's such a pleasure to have you with us. Welcome.

Anne: Thank you for inviting me, Eva.

Eva: So, Anne, can you tell us a bit more about your own journey? And what inspired you to focus your career on nature?

Anne: Yeah sure, I didn't really even plan to have a career in nature, because I didn't really even know what that would entail. But Earth Science was just always the thing that I found most interesting when I was kind of growing up and through school, and then through university. And after my MSc in Environmental Management, I worked in consultancy roles in various guises always in the environmental sector. And although that was really interesting, and I got to do some really cool things like visit food factories and see how food is made - I did a lot of report writing, and I'm not sure that all of those reports were used. And so I actually wanted to be the person that made the things happen, which was why I was so excited to get the Environmental Manager role with what is now abrdn. But now, I am hoping to make even more impact by working in the investment side because it has such a bigger scope to make change. And so yeah, I'm really excited about that.

Eva: Absolutely. It's fantastic to have you on the team. And you've done some great work in our sustainability themed focus on preserving natural capital. So as I say, this is one of our core sustainability themes. And can you tell us why that's so important for investors and what it entails?

Anne: So ‘natural capital’ is the Earth and therefore are raw materials and services. And we're really good at using them, but sadly, not in a very sustainable way. Because we take more than can be regenerated, we're depleting the very things on which our economies rely on, we're basically entering into natural capital debt. It takes about 1.7 Earths to cover our current demand on natural capital. And that's really important for investors, because the businesses we invest in all have dependencies on those resources. And that unsustainable use, and the debt that it creates, has real risks for businesses, but also opportunities for those companies that can provide solutions to the issue, or who are managing their natural capital use really well. And alongside that physical dependency, is the growing awareness of this issue. And that is driving more policy and regulation for the businesses that we invest in. It's also changing people's preferences for the kind of products that they want to buy. And again, that leads to recent opportunities for investors.

Eva: And you’re a co-author of two biodiversity papers that we published recently. Can you tell us a bit more about the key messages within those papers? And why it's so important for investors to integrate that biodiversity aspect into their thinking?

Anne: Yeah, sure. So the first paper was really kind of just trying to set the scene because while biodiversity is a hot topic, it's not necessarily something that investors have looked at before.

So the paper covers why the crisis is happening – so, the physical drivers like over exploitation or climate change, but the economic drivers to and the economic drivers are really important because this crisis is really a classic example of market failure. Ecosystem services have been woefully undervalued and overused. And sadly, that tends to be paid for by society, rather than the businesses that gain financially from the use of those services and resources.

The first paper also covers the scale of the crisis, both in terms of the biodiversity loss itself and the fact that we're entering into a period of extinction that we've not seen since the demise of the dinosaurs, but also the economic dependencies and implications. For example, around half of GDP is moderately or highly dependent on nature. The economic dependencies are staggering. And our planet's ecosystem services, they were a commodity company, it would be 50 times worth the economic value of a company say like Apple.

Importantly, we cover the link between biodiversity loss and climate change. And we give a really good kind of pragmatic example of that, which is the nature-based solutions. Nature-based solutions are ecosystems like forests, or mangrove swamps that can absorb carbon. So, the restoration of those ecosystems not only improves biodiversity, but also helps to address the climate crisis, because they are absorbing carbon and there is a carbon credit and a market for that. It addresses the issue around valuing biodiversity. So, it deals with both issues together. And that kind of focuses on the opportunity side, not just the risks, which can be a little bit depressing. And we look at the changing policy and regulatory landscape.

And the second paper was written to address the ‘so what’ for investors. That's the second part of your question. We know the issue is climbing up the investment agenda. And that's driven by investor demand on sustainability, that changing regulatory landscape. And also just the materiality of the issue, and the fact that it has implications across every market and geography. Concerns for investors include the financial risks, that biodiversity loss presents, the impact of increasing regulation, changing customer behaviour, the reputational risks that it can bring companies and also the supply chain impacts as well for some.

And for those companies that are managing natural capital very poorly, there are also possible implications in terms of access to financial capital. And we give our view on all of those risks and opportunities. And we kind of do that on a sector basis. So, we've kind of covered the sectors that we think are most exposed and provide engagement questions that we think investors should be considering when speaking to those sectors.

Eva: That's great. Can you maybe give us an example of a risk and an opportunity to bring that to life?

Anne: Yeah, absolutely. So, I'm going to focus on food - because food to biodiversity loss is the equivalent of fossil fuels to climate change. In terms of risk, I think we're going to see increased fines for companies as the regulation tightens. The proposed EU deforestation free regulation is a really good example of that. It means that companies who are actually shown or proven to be causing deforestation, could face fines of up to 4% of their turnover. And that is a big risk for any company. It particularly focuses on those companies exposed to forest risk commodities, and those forest risk commodities are things like beef, palm oil, soya, wood, cocoa, and coffee. And on the brighter side of this, on the opportunity side, there's a lot more opportunity for the pure play solutions in this space. It's not as clear as the pure pay solutions for climate change. Although you could argue that you could put a renewable company into that space because climate change is one of the biggest drivers of biodiversity loss. But there are other opportunities for sample companies like vertical farming, because vertical farming uses significantly less water, pesticides and fertilisers. And it also allows for less food miles as well. So there's good opportunities in that space, too.

Eva: And what about the challenges? What are the main challenges you're facing when it comes to integrating - or investors are facing in general - when it comes to integrating nature into the investment process?

Anne: It's definitely data, Eva, I mean, it's a really big issue. So, thanks to TNFD framework, we now have a framework to follow but the data is the challenge - there isn't this one single metric that you can apply like you have CO2 for climate and the dependencies and impacts are also very location based. So, you have to consider the location when you are trying to address this issue.

Eva: So Anne, can you quickly tell us what TNFD is?

Anne: So ,TNFD stands for the Taskforce for Nature-related Financial Disclosures, and it very much follows in the footsteps of TCFD, which is the Taskforce for Climate Related Financial Disclosures. And what TNFD does is it provides a framework for companies and corporates to, basically cover their financial exposure due to biodiversity loss and their dependencies on that. There's still plenty we can do to integrate biodiversity loss into our investment process. And that data issue is definitely something that a lot of effort and time has been put into, I'm expecting to see some big changes very soon.

Eva: And when we think about the policy response, you talked earlier and explained, you know, the issue of biodiversity really being a market failure, and we need the right incentives from policymakers to help address that failure. And we've got COP15, the United Nations Biodiversity Summit, which is expected to be for biodiversity what the 2015 Paris Agreement was for climate change in terms of setting the targets in the framework. But COP15 has just been postponed. What is your view on the policy environment to support Biodiversity Action at the moment?

Anne: Yeah, that's a really good, impossibly complicated question. I think they were really positive signals, but we've had positive signals before, followed by not enough action. So, the main issue with biodiversity loss is that the services and ecosystems that provides are underpriced and so what we need is changed there. So, for climate, you have a carbon market - so I think we need to biodiversity market, we need to address that lack of value that exists. But I also worry about some of the long-term targets being set. So, everybody, when they have a deadline tends to leave it to the last minute. But we really can't do that for biodiversity, because the longer we leave it each week, each month each year, the more those ecosystems degrade, and the harder the restoration becomes, you're depleting a resource that cannot be always replaced.

Last time around, for the 2020 biodiversity targets there was also a really big funding gap that we need to see avoided this time around. So, the funding gap last time was around 100 billion US dollars. And it's generally agreed that those biodiversity targets were not met. Also, I worry that just in the social political landscape that we have with the conflicts in the Ukraine, and concern around food prices, given that food is such an important part of biodiversity loss, such a big driver of that loss, that our demand for food now, might mean that we lean back on poor production processes, and that we create more damage because we're quite short term in the way that we think.

Eva: Yeah, that's obviously a major concern. We need to watch that closely, how that develops. I think you're right, this focus on short term is an issue when it comes to nature and climate change and many of the other externalities that we're seeing and facing. But on the upside, have you seen any exciting innovations when it comes to biodiversity?

Anne: Yes, so it's really exciting. There are a lot of startup and small cap companies like cultivated meat companies, vertical farms, agri-tech companies that show a lot of promise. There's this one company that really sticks in my mind, because it's something that annoys me when I go shopping in the supermarket. And what they have is this edible spray coating. And that coating expands the shelf life of products like avocados and cucumbers, which means there’s less food waste, but also it removes the need for plastic as well. So those kinds of innovations are really exciting in this space.

I also think that nature-based solutions are an exciting opportunity, but only when they're done well, and that they take climate, biodiversity and the local economy into account. I'm really pleased to see what abrdn’s done with the launch of their nature-based solution in the Cairngorms last year. It hasn't focused on carbon alone at all. It's really looking at the restoration of biodiversity at the site. And we even are going to have an ecologist monitoring and measuring those impacts. So that is a very exciting space, I'd love to see those kinds of developments in nature-based solutions in our oceans because that one particular space is really underfunded.

But there's also some really exciting innovations that come from the large cap companies, which may be a less pure play. But because just the sheer scale of those companies, they can have a real impact. So some of them have already stated their ambitions to become nature positive. But we also see companies who have just got some really interesting, innovative projects underway as well.

Eva: So lots of exciting stuff happening in the corporate world. But what about your own personal life? How is the aspect of nature reflected?

Anne: Well, even since you volunteered with me just last month, you know how, how I'd like to prefer that in my own personal life. So, I love to get involved with community biodiversity projects, because it's actually quite easy to get depressed around some of the statistics on this topic area. And sometimes just helping improve your own local green space is a real antidote to that. I get to meet the most inspiring people when I've done volunteer work. So it's also just wonderful to meet the people who are making change. And it's rewarding to do physical labour and then at the end of the day, be able to kind of like look and see kind of what you've managed to achieve that day, which sometimes we don't get to do in our jobs.

Eva: Yeah, that was really lovely. And looking into the future - so let's say three years into the future, where would you really like to see the investment industry when it comes to tackling biodiversity loss and preserving natural capital?

Anne: In three years’ time - I guess it's maybe blue-sky thinking - I'd love to have industry wide ways to integrate the protection of biodiversity into investment decisions, and to also have some brilliant solution products as well because those two things combined would enable the allocation of capital into a net zero net positive world. Tackling biodiverse sauce is really in the early phases. So, we need as much collaboration and innovation within the industry as possible. So, it's a time of knowledge sharing and working with the rest of the investment community.

Eva: Yeah, and I think there's lots happening in the investment community and in the industry with things like launching the TNFD framework, for example, that will hopefully help improve disclosures, and so I think we're seeing steps in the right direction, which hopefully will enable us to make progress as you say.

So, the final question, it'd be great to leave listeners with something that inspires you and keeps you motivated. So, is there maybe a person that inspires you or a book or podcast that you would recommend?

Ann: Yeah, the inspire me question - I wasn't really sure if there's an individual that inspires me, I guess, Sir David Attenborough's been a pretty big part of my life ever since I was a child, I just loved watching his programmes. But every day, it's just like, little acts of kindness that people do that aren't required of them, but they just make everybody else's life more joyful - I find that really inspiring. As I said, already, in my previous role, I got to work with volunteers and friends of groups of these people who give up their time to take care of their local greenspaces. They really inspire me; I've always found them to be like so kind and productive and inspiring. And just, it's so nice that they make their world that little bit better.

And as for books, I'm really ashamed to admit that I'm not a great reader, and I often don't finish books, which I think some people find quite shocking. One book I did really enjoy reading was, ‘Bringing Back the Beavers’ by Derek Gow. This guy's pretty determined, and he's really straight talking. And I love the fact that he's worked so hard to bring back the little furry architects who work the UK. So while I'm not a great reader, I do love listening to podcasts. And my favourite one is Freakanomics Radio.

Eva: Fantastic. We've come to the end of our podcast and it's been such a pleasure to have you with us Anne, thanks a lot for your time and your inspirational contributions. No, thank you, Eva. You've been listening to the abrdn Sustainable Investing podcast, a podcast relating to all things responsible and sustainable investing and today a special episode with Anne Leoni, our lead on nature related insights. Thank you all for tuning in. You can find all our episodes on various podcast channels such as Spotify and Apple as well as on the abrdn website. Until our next podcast good bye for now.