What is Biodiversity Loss & Why Does it Matter for Investors?

Global investors need to consider biodiversity loss as a significant factor in their investment decisions. Recent research from Morningstar Sustainalytics demonstrates that biodiversity risks could substantially impact portfolio performance over time.

The study, conducted by Martin Vezer, PhD, the ESG Research Associate Director at Morningstar Sustainalytics, revealed compelling evidence of this relationship. Looking at Consumer Goods stocks over a five-year period, portfolios with lower Material ESG Issue (MEI) risk scores significantly outperformed their counterparts. Specifically, these lower-risk portfolios achieved a 51.1% cumulative total return, while similar portfolios with higher MEI risk scores only managed an 8.5% return.

This stark contrast in performance suggests that biodiversity risks have real financial implications that investors would be wise to factor into their investment strategies.

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