In December 2022, after multiple Covid-19-related delays, the conclusion of the COP 15 conference in Kunming, China, saw the agreement of a 2030 Global Biodiversity Framework which aims to halt and reverse nature loss by 20301.
Given the complexity of biodiversity, the agreement lacks an overarching rallying point equivalent to the 1.5 degree target of the 2015 Paris Agreement. However, it does include 23 goals addressing the five drivers of biodiversity loss identified by the Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES): land use change, pollution, over-exploitation of resources, invasive species, and climate change. Among the goals are protecting 30% of global land and sea area by 2030, reducing pollution from fertilisers and pesticides, halving food waste and reforming harmful subsidies.
Countries will now develop and implement biodiversity action plans to respond to these goals prior to the next COP in 2024. While the 23 goals have varying degrees of potential materiality for companies and investors (Figure 1), we anticipate that the overall impacts from the agreement will materialise in three ways. First, it will increase attention on companies’ negative impacts on nature, whether through waste, plastics, chemicals, deforestation or otherwise. Second, it will increase national-level regulation, subsidies and programs in support of COP 15 goals. And third, it will ramp up the focus on new financing and investment mechanisms for biodiversity and conservation.
Given the close inter-relationship between nature and food production, we believe some of the most material impacts from COP 15 will be around the food system. A drive to restore degraded land and nearly double the area under conservation, while reducing negative impacts from harmful pesticides and fertiliser pollution should impact the sustainable food transition, as outlined in our Responsible Investment Q3 2022 article2. This could be a catalyst for companies involved in research and development (R&D) on products that can increase resilience to climate and water stress, improve productivity and efficiency in food systems, and decarbonise food production.
However, as with any global non-binding agreement, the proof will lie in its implementation. We note that many of the goals are yet to define the data, baselines and definitions that will be used. The outcome of these and the subsequent implementation at a national level will ultimately determine the ambition and impact of the COP 15 framework.
Highlights of some of the goals and our initial assessment of the potential implications for investment are included in the table below.
Figure 1: implications of select key targets in the 2030 Global Biodiversity Framework3
Food & Materials transition engagement: Food security and biodiversity
Company: Tesco
Sector and country: Retail, United Kingdom
Why we engaged ?
Tesco is a significant holding and we have had an ongoing engagement with the company on a range of sustainability issues. Earlier in 2022, we identified Tesco as having relatively weak disclosure on nature relative to its risk exposure on the theme.
How we engaged ?
We had a small group meeting with the Head of Environment and Sustainable Agriculture in December 2022 on developments related to Tesco’s nature strategy.
What we learnt ?
- Nature and biodiversity are emerging themes and although Tesco’s work in this area is under development, their efforts to date are promising. In particular, Tesco is funding and piloting a location-based mapping tool with Worldwide Fund for Nature (WWF) that will provide an insight into nature risk among suppliers (e.g. vulnerability to water scarcity, soil degradation, or pollinator decline). Innovatively, this exposure data can be overlaid with environmental impact data and with suppliers’ scope 3 emissions. Considering risk and impact together will enable Tesco to identify “hotspots” where it can focus its efforts on. Roll out will start with dairy, then fresh produce, and eventually grains and commodities.
- Commodity traceability on deforestation is a work in progress. Despite putting a lot of resource towards traceability, Tesco underlined the scope of the challenge given their vast supplier network, different regulatory approaches being taken between the UK and Europe and systemic issues with opaque commodity supply chains.
- Soy is the company’s biggest exposure to deforestation risk. Currently, there is only a small volume of fully traceable soy and it is pursuing multiple avenues to try and improve supply. Collaboration on a pre-competitive basis is key and Tesco has been involved in leading several initiatives.
- Tesco will be among the first to pilot report on TNFD.
Outcome
We were reassured as to the depth of Tesco’s approach to nature in operations and in supply chain including the innovative supplier mapping work with WWF. In our view, further effort to reduce sourcing impacts will build on Tesco’s leadership on demand-related aspects such as food waste and sales of plant-based products. Traceability remains a challenge, particularly for key commodities such as soy. We will continue to monitor progress on this at Tesco and across the sector in light of the incoming EU legislation.
