Abstract
This report is part of the Handbook of Sustainable Finance (Roncalli, 2025). It provides the basics of biodiversity for students and professionals who want to understand this topic and the key challenges of biodiversity investing. The first three sections cover the definition of biodiversity, ecosystem functions and services, and threats to biodiversity. These correspond to material typically taught in conservation biology courses. The fourth section focuses on measuring biodiversity. Finally, the last two sections cover biodiversity governance and regulation, and biodiversity investment approaches.
In this report, we will learn that biodiversity goes far beyond the issues of species extinction and deforestation. In fact, it is much broader and includes fisheries, food security, health issues, invasive species, natural resources, pollution, and water stress, among others. However, most measures of biodiversity focus primarily on species richness, abundance, or extinction. From a financial perspective, this is unsatisfactory, and biodiversity finance requires more sophisticated metrics. In addition, new regulations and frameworks are pushing investors to become actively involved in biodiversity restoration. The concept of double materiality also underscores the importance of biodiversity to companies and implies some hidden risks in financial assets because they impact or can be impacted by biodiversity loss. Despite growing awareness, long-term investors are not yet fully equipped to integrate biodiversity risks into their investment decisions. While progress is being made, there is still a long way to go in developing robust methodologies that can effectively integrate biodiversity into sustainable investment strategies.
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