Sustainable finance and agriculture: what levers to promote biodiversity?

Modern agriculture faces a fundamental paradox: it depends entirely on natural resources for its productivity, but sometimes contributes to the degradation of the ecosystems it needs. The World Economic Forum estimates that the additional costs generated by the environmental impacts of intensive agriculture amount to $400 billion annually, due to a decline in productivity of nearly 52% on agricultural land. Oxford University estimates that $11 trillion in agricultural assets are threatened by the decline in natural resources.

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At the same time, restoring degraded ecosystems could generate $84 billion in economic benefits, according to WWF estimates, while large agri-food companies that invest in sustainable agriculture strategies show 2% higher revenue growth.

Economic analysis therefore argues for an acceleration of the transition. In light of this, financial institutions have several levers at their disposal to steer investment towards practices that are more respectful of biodiversity.

The financial players' toolbox

While investment needs remain high in the agricultural sector in Europe – the European Commission estimated them at more than €62 billion in 2022 – financial institutions have a key role to play in supporting the entire value chain towards greater consideration for biodiversity. To do this, they have several levers at their disposal: 

Assessing risks and impacts using ESG ratings

Specific indicators exist to measure the risks and impacts associated with agriculture. These metrics enable asset managers to direct capital towards the most sustainable practices and thus build portfolios aligned with biodiversity conservation objectives. Each fund must define its own strategy in this area, based on available data related to issues such as pesticide use, palm oil production, GMOs, intensive livestock farming, soy production, etc.

Drawing red lines with sector exclusions

Thanks to these indicators, financial institutions can also establish precise thresholds to exclude activities that have too negative an impact on biodiversity from their investment portfolios. LBPAM and Eurazeo, for example, exclude companies that generate more than 20% of their turnover from pesticides. While the levels of requirement vary from one player to another, they nevertheless converge towards the same logic: financially penalising the most harmful practices. Companies with unsustainable practices are seeing their access to financing restricted, encouraging them to change.

Shareholder engagement: proactive dialogue for change

Shareholder engagement is a particularly powerful lever for transforming agricultural practices. Investors can set specific targets with companies. For example: achieving 30% RSPO-certified production within 6 to 12 months. Or implementing systematic supplier traceability, or reducing the use of antibiotics in livestock farming.

This individual approach is reinforced by large-scale collective initiatives. FAIRR, a group of investors, brings together $89 trillion in assets under management to promote sustainable practices in the animal protein industry through shareholder engagement campaigns. This pooling of efforts multiplies the impact of engagement initiatives.

Note: Certain organisations (NGOs, international organisations) provide ESG data that financial institutions can use for rating, exclusion or shareholder engagement purposes.

The emergence of specialised thematic funds

Twenty-four European funds are dedicated exclusively to biodiversity (according to MSCI), pioneering initiatives that are leading the way. The Mirova Sustainable Land Fund 2, which is targeting €350 million, for example, devotes 60% of its investments to regenerative agriculture and 40% to reforestation in developing countries.

The methodology developed by Mirova illustrates the growing sophistication of these investment vehicles. The fund measures its impact using precise quantitative indicators: hectares under conservation, CO2 emissions avoided, number of jobs created, female employment rate, etc. This systemic approach goes beyond simple exclusion logic to create a measurable positive impact.

An ebook to better understanding the link between finance, agriculture and biodiversity

WeeFin's team of ESG experts has written a 20-page guide to explore in more detail the links between sustainable finance and agriculture in the service of biodiversity conservation. It is part of a series of publications dedicated to the links between sustainable finance and biodiversity and  can be downloaded here.