Home to 80% of the Earth’s biodiversity1, forests are a powerful ecosystem, providing invaluable economic and social services. Production of wood, oxygen, food and medicines, carbon sequestration, climate regulation, refuge for plant and animal species… the ecosystem services provided by the forest are immense and vital. In Switzerland, one third of the territory is covered by forests, 35% of the species depend on them, and half of the priority species find refuge there.
OUR ALLY AGAINST CLIMATE CHANGE
Forests are natural carbon sinks and play a decisive role in the rainfall regime, store water, protect soils, and help lower temperatures… However, between urbanization and intensive monocultures, its destruction is accelerating. Not to mention the fires of the summer, which have also caused record CO2 emissions in Europe, some 6.4 megatons of carbon released according to the Earth observation program Copernicus2.
The preservation of forests concerns many sectors, from construction to consumer goods. Wood is an alternative to concrete, as is plastic for packaging, for example. As responsible investors and pioneers of listed impact investing in France, we are paying increasing attention to the impact of companies’ strategies on this ecosystem, whether they are loggers, wood producers, or use wood or its derivatives, as well as to their reforestation policies.
The richer an ecosystem is in biodiversity, the more resilient it is.
Among the most virtuous, in our opinion, SCA3, Europe’s largest forest owner, produces materials made from wood and renewable raw materials, which replace plastic in packaging. This Swedish group, whose forests are certified by the global PEFC and FSC standards, replaces at least two trees for each one cut down and reduces cutting areas that are home to endangered species. Another example is the German company Steico, world leader in natural wood-based insulation. Its insulation and construction products, made from wood that sequesters carbon, emit significantly less CO2 than cement or steel.
We also pay particular attention to companies whose business or raw materials depend on biodiversity, to favor those whose strategies take sustainable management into consideration, such as LVMH. Moët-Hennessy, for example, plants hedges and forests to cut the wind, regulate rainwater runoff, promote pollination, improve soil quality, etc., to preserve the ecosystem of its vineyards. This involves a higher cost, but reflects a strategic long-term vision. The richer an ecosystem is in biodiversity, the more resilient it is. Also dependent on biodiversity, L’Oréal is committed to designing 100% recycled packaging by 2030, without involving any deforestation, and to using renewable, biosourced raw materials from sustainable sources for its formulas.
Another point of vigilance is the social impact of our policies. Just transition is one of the challenges of transforming the economy, and one of the pillars of our impact strategy. Just transition takes into account the consequences of the climate trajectory of our portfolio companies on employment and product accessibility. 2.4 billion people in the world depend on wood as fuel for cooking and two thirds of the world’s roundwood production comes from wild tree species, as the IPBES points out4. Paying attention to reforestation policies allows us to verify that they are carried out in consultation with local communities.
The loss of ecosystem services provided by forests generates risks for people, companies, the economy and the planet. Awareness is emerging, and climate change is reshuffling the deck. If the role of companies, essential links in the protection of biodiversity, is decisive, the role of investors can also change the deal. The stakes are high: the World Economic Forum estimates that 50% of the world’s GDP depends on biodiversity5.
1 WWF
2 Between June 1 and August 21, 2022
3 The stocks and sectors are listed as examples. Their presence in the portfolio is not guaranteed.
4 IPBES, 2022
5 FMI, Global Risk Report, 2021
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Source: Allnews | 11 oct 2022 | Paul Merle, La Financière de l’Echiquier (LFDE).
Link to the online article (FR)
Paul Merle, Manager
With 20 years of experience, Paul joined LFDE in 2020 as co-manager of Echiquier Climate Impact Europe and Echiquier Major SRI Growth Europe. He started his career in 2001 at CPR Bank before joining Federis Gestion d’Actifs where he became Head of SRI analysis in 2010. In 2016, he joined La Banque Postale AM as SRI manager-analyst and became Manager of Sustainable Thematic Equities in 2019. He holds a Master’s degree in Finance from Paris 1 Panthéon Sorbonne.
La Financière de l’Echiquier (LFDE) has been an investor in companies for over 30 years. It is one of the leading entrepreneurial management companies in France. A specialist in European and international stock selection, LFDE has developed a range of responsible and thematic solutions. Present in Switzerland since 2010, LFDE manages €14.5 billion as of 31.12.2021.