Welcome to the FEAR & GREED Business Interview. I'm Sean Aylmer. This is pretty confronting. Australia is home to over 10% of the world's biodiversity, but we're second globally for biodiversity loss and have the highest rate of decline in developed nations. For some companies and investors, it's crystallized a new focus for their ESG efforts, putting a very real, very significant value on the environmental aspect of ESG. One global asset management firm has been particularly active in this space. UK- based Federated Hermes has more than 750 billion US dollars in assets under management. In Australia, it works with leading institutions and super funds, and my guest this morning was in the country recently to meet with clients and speak to the rise of the corporate biodiversity champion. This is general information only. You should always seek professional advice before making investment decisions. Ingrid Kukuljan, Head of Impact and Sustainable Investing at Federated Hermes Limited joins me from London. Ingrid, welcome to FEAR & GREED.

Welcome to the FEAR & GREED Business Interview. I'm Sean Aylmer. This is pretty confronting. Australia is home to over 10% of the world's biodiversity, but we're second globally for biodiversity loss and have the highest rate of decline in developed nations. For some companies and investors, it's crystallized a new focus for their ESG efforts, putting a very real, very significant value on the environmental aspect of ESG. One global asset management firm has been particularly active in this space. UK- based Federated Hermes has more than 750 billion US dollars in assets under management. In Australia, it works with leading institutions and super funds, and my guest this morning was in the country recently to meet with clients and speak to the rise of the corporate biodiversity champion. This is general information only. You should always seek professional advice before making investment decisions. Ingrid Kukuljan, Head of Impact and Sustainable Investing at Federated Hermes Limited joins me from London. Ingrid, welcome to FEAR & GREED.

Good morning, Sean. Thank you for having me.

Good morning, Sean. Thank you for having me.

It's very difficult to go to a conference and not hear about biodiversity at the moment when we're talking about investing, but just explain to our listeners what is biodiversity and why does it matter to corporates?

It's very difficult to go to a conference and not hear about biodiversity at the moment when we're talking about investing, but just explain to our listeners what is biodiversity and why does it matter to corporates?

Yeah, put simply biodiversity is the variety of plant and animal life in the world or a particular habitat and obviously want to have a high level of biodiversity. Unfortunately, scientists will tell you that we are in the midst of the six global extinction and we have severely altered 75% of the Earth's surface and 66% of the marine habitats just to satisfy two needs, our consumption and our energy needs. And why it's important to corporates is that everyone and everything depends on biodiversity. So given that it's a resource that is limited, whereas people think that it's permanent, corporates are becoming increasingly worried and you can see the disruptions that we are seeing across supply chains globally.

Yeah, put simply biodiversity is the variety of plant and animal life in the world or a particular habitat and obviously want to have a high level of biodiversity. Unfortunately, scientists will tell you that we are in the midst of the six global extinction and we have severely altered 75% of the Earth's surface and 66% of the marine habitats just to satisfy two needs, our consumption and our energy needs. And why it's important to corporates is that everyone and everything depends on biodiversity. So given that it's a resource that is limited, whereas people think that it's permanent, corporates are becoming increasingly worried and you can see the disruptions that we are seeing across supply chains globally.

Biodiversity is, my understanding at least, it's broader than some of the other issues that corporates face or investors face. If you talk about governance, we understand governance and the need for good governance, etc. The thing about biodiversity though, it kind of almost creeps into all aspects of a company.

Biodiversity is, my understanding at least, it's broader than some of the other issues that corporates face or investors face. If you talk about governance, we understand governance and the need for good governance, etc. The thing about biodiversity though, it kind of almost creeps into all aspects of a company.

That's correct, Sean. That's well put. It creeps into all aspects because obviously you have to take it as a part of your risk management as well as a part of your strategic decisions. So really it goes across the E, the S, and the G. And when I'm saying around the S, which people think why around the S, if you think about the supply chains, especially if you're part of the food industry, the S is very important because 40% of the global population directly and indirectly depends on agriculture. So disruption of those really have huge consequences both in the local communities as well as across the supply chains for the corporate itself.

That's correct, Sean. That's well put. It creeps into all aspects because obviously you have to take it as a part of your risk management as well as a part of your strategic decisions. So really it goes across the E, the S, and the G. And when I'm saying around the S, which people think why around the S, if you think about the supply chains, especially if you're part of the food industry, the S is very important because 40% of the global population directly and indirectly depends on agriculture. So disruption of those really have huge consequences both in the local communities as well as across the supply chains for the corporate itself.

How big a challenge is this in Australia?

How big a challenge is this in Australia?

Huge challenge in Australia and Australia is key for global biodiversity. Practically you have about 10% of all the species on Earth. You are one of the 17 mega diverse countries. 85% of your plant species are endemic, which is a very high number and you have a very high economic dependence on biodiversity. So whether it's agriculture, forestry, fisheries, and obviously tourism because all of those depend on the healthy native vegetation ecosystems as well as the marine life. And then you have many threats. Your track records hasn't been fantastic. You're actually the only country that is included into the 24 global hot spots. In terms of deforestation, you're number five in the world and you're the only developed nation to make that cut. The main reason for this is obviously the cattle farming followed by the logging. It's quite curious why things are not changing in Australia given that you have been seeing the effects of the climate change firsthand and you are at big risk. So to be ruining the natural carbon sinks and not taking care of your biodiversity is not an option that I think you have.

Huge challenge in Australia and Australia is key for global biodiversity. Practically you have about 10% of all the species on Earth. You are one of the 17 mega diverse countries. 85% of your plant species are endemic, which is a very high number and you have a very high economic dependence on biodiversity. So whether it's agriculture, forestry, fisheries, and obviously tourism because all of those depend on the healthy native vegetation ecosystems as well as the marine life. And then you have many threats. Your track records hasn't been fantastic. You're actually the only country that is included into the 24 global hot spots. In terms of deforestation, you're number five in the world and you're the only developed nation to make that cut. The main reason for this is obviously the cattle farming followed by the logging. It's quite curious why things are not changing in Australia given that you have been seeing the effects of the climate change firsthand and you are at big risk. So to be ruining the natural carbon sinks and not taking care of your biodiversity is not an option that I think you have.

Stay with me Ingrid. We'll be back in a minute. I'm speaking to Ingrid Kukuljan, Head of Impact and Sustainable Investing at Federated Hermes Limited. So I understand what you've just said. Do you think Australian corporates understand it, number one and number two, if they do understand it, are they taking it seriously enough?

Stay with me Ingrid. We'll be back in a minute. I'm speaking to Ingrid Kukuljan, Head of Impact and Sustainable Investing at Federated Hermes Limited. So I understand what you've just said. Do you think Australian corporates understand it, number one and number two, if they do understand it, are they taking it seriously enough?

Those that are directly impacted understand it. I think you start taking it seriously enough once the regulation kicks in and without regulation, it's quite difficult to make corporates change their ways unless they can get away with what they're away with. I mean, you have a delay in your nature repair bill again, which was a bit surprising and those sorts of things are not going to help. But there are corporates that are taking initiative themselves to take care of biodiversity and understanding importance and the value of it and the reason why every corporate should be taking biodiversity into account. As I mentioned earlier, it's not a permanent resource, it's a scarce resource. Just like the way you think about copper, aluminum, you should be thinking about biodiversity. And the second reason as well is if you look today, there was a very important piece of work done in the UK by Professor Dasgupta who said, " If you take the living standards that we have globally today, we need the next extra 1. 6 Earths just to keep where we are."

Those that are directly impacted understand it. I think you start taking it seriously enough once the regulation kicks in and without regulation, it's quite difficult to make corporates change their ways unless they can get away with what they're away with. I mean, you have a delay in your nature repair bill again, which was a bit surprising and those sorts of things are not going to help. But there are corporates that are taking initiative themselves to take care of biodiversity and understanding importance and the value of it and the reason why every corporate should be taking biodiversity into account. As I mentioned earlier, it's not a permanent resource, it's a scarce resource. Just like the way you think about copper, aluminum, you should be thinking about biodiversity. And the second reason as well is if you look today, there was a very important piece of work done in the UK by Professor Dasgupta who said, " If you take the living standards that we have globally today, we need the next extra 1. 6 Earths just to keep where we are."

That's a bit stark.

That's a bit stark.

That's very scary. And the latest space exploration news, that Bezos and Musk have not been successful in finding this extra 1. 6 Earths. So we have to deal with what we have here and it should be a priority for regulators and corporates to really start considering biodiversity. But on a positive note, things are changing. We had the global biodiversity framework that was agreed almost two years ago in Montreal, also known as the COP 15, which is very ambitious. We also have TNFD, which is for the time being a voluntary reporting system for the corporates, and the pilot was taken up by 320 corporates globally. So things are starting to happen in a positive direction.

That's very scary. And the latest space exploration news, that Bezos and Musk have not been successful in finding this extra 1. 6 Earths. So we have to deal with what we have here and it should be a priority for regulators and corporates to really start considering biodiversity. But on a positive note, things are changing. We had the global biodiversity framework that was agreed almost two years ago in Montreal, also known as the COP 15, which is very ambitious. We also have TNFD, which is for the time being a voluntary reporting system for the corporates, and the pilot was taken up by 320 corporates globally. So things are starting to happen in a positive direction.

What about the opportunity for investors in all this? Where are they?

What about the opportunity for investors in all this? Where are they?

The opportunity is huge, and the reason why the opportunity is huge is twofold. First, from the risk perspective, the need is to spend about a trillion in terms of to restore and preserve our ecosystems and biodiversity. The cost of inaction to the global GDP is 3 trillion. So if we don't do anything, it's three X. Investors are starting to pay attention. Asset allocators are starting to pay attention, but it's a recent phenomenon and it's something where we really need to see more movement. The reason for this is that biodiversity loss poses the biggest systemic risk to the global economy. So what we are hoping to see that in a very short period of time, this will become a key question for asset allocators. They'll be asking their investors whether they're considering and taking into account their impacts and dependencies on biodiversity and whether they're doing full analysis. And the reason why you need to do this, they are businesses that will face operational, financial, reputational, even permitting risks. There are areas they're so- called 30 by 30 schemes for the protection of terrestrial areas, waterways and oceans. And if you happen to do business in those areas, your business may become obsolete. So there are a myriad of risks. The opportunities are that it's been estimated that nature- positive jobs could create an additional almost 400 million jobs by 2030. That's the first thing. Second one is that there was a study that was done with food that people who work in nature- related businesses, climate slash nature are 3. 8 times more paid than those that work in fossil fuel industries. So that's also an interesting fact.

The opportunity is huge, and the reason why the opportunity is huge is twofold. First, from the risk perspective, the need is to spend about a trillion in terms of to restore and preserve our ecosystems and biodiversity. The cost of inaction to the global GDP is 3 trillion. So if we don't do anything, it's three X. Investors are starting to pay attention. Asset allocators are starting to pay attention, but it's a recent phenomenon and it's something where we really need to see more movement. The reason for this is that biodiversity loss poses the biggest systemic risk to the global economy. So what we are hoping to see that in a very short period of time, this will become a key question for asset allocators. They'll be asking their investors whether they're considering and taking into account their impacts and dependencies on biodiversity and whether they're doing full analysis. And the reason why you need to do this, they are businesses that will face operational, financial, reputational, even permitting risks. There are areas they're so- called 30 by 30 schemes for the protection of terrestrial areas, waterways and oceans. And if you happen to do business in those areas, your business may become obsolete. So there are a myriad of risks. The opportunities are that it's been estimated that nature- positive jobs could create an additional almost 400 million jobs by 2030. That's the first thing. Second one is that there was a study that was done with food that people who work in nature- related businesses, climate slash nature are 3. 8 times more paid than those that work in fossil fuel industries. So that's also an interesting fact.

Do you think in the next five years, obviously you have a great interest in this Ingrid, in the next five years, what do you want to see from Australian corporates? Obviously you want to see government legislation, so I think that's part of it. What about corporates though? So let's just park the legislation and hopefully that passes, but what do corporates and Australia need to do in the next five years?

Do you think in the next five years, obviously you have a great interest in this Ingrid, in the next five years, what do you want to see from Australian corporates? Obviously you want to see government legislation, so I think that's part of it. What about corporates though? So let's just park the legislation and hopefully that passes, but what do corporates and Australia need to do in the next five years?

The first thing they need to do is to start analyzing their impacts and dependencies on biodiversity and to actually know where their weak points are and what they should be doing. So that should be the starting point for any company in Australia or elsewhere. Second, it should be that biodiversity becomes part of the governance and is included as one of the biggest global risks that we are facing as such, the businesses itself. Third thing, it would be nice to see that KPIs, especially for Remco, are linked to biodiversity positive outcomes. And every corporate, it's not a laundry list of demands, but every corporate should put targets that are relevant to their businesses and look to improve their negative or minimize their negative impact on biodiversity. And that would really go a long way in terms of at least helping to reduce biodiversity loss.

The first thing they need to do is to start analyzing their impacts and dependencies on biodiversity and to actually know where their weak points are and what they should be doing. So that should be the starting point for any company in Australia or elsewhere. Second, it should be that biodiversity becomes part of the governance and is included as one of the biggest global risks that we are facing as such, the businesses itself. Third thing, it would be nice to see that KPIs, especially for Remco, are linked to biodiversity positive outcomes. And every corporate, it's not a laundry list of demands, but every corporate should put targets that are relevant to their businesses and look to improve their negative or minimize their negative impact on biodiversity. And that would really go a long way in terms of at least helping to reduce biodiversity loss.

Ingrid, thank you for talking to FEAR & GREED.

Ingrid, thank you for talking to FEAR & GREED.

Thanks, Sean.

Thanks, Sean.

That was Ingrid Kukuljan, Head of Impact and Sustainable Investing at Federated Hermes Limited. This is the FEAR & GREED Business Interview. Remember, this is general information only and you should seek professional advice before making investment decisions. Join us every morning for the full episode of FEAR & GREED, daily business news for people who make their own decisions. I'm Sean Aylmer. Enjoy your day.

That was Ingrid Kukuljan, Head of Impact and Sustainable Investing at Federated Hermes Limited. This is the FEAR & GREED Business Interview. Remember, this is general information only and you should seek professional advice before making investment decisions. Join us every morning for the full episode of FEAR & GREED, daily business news for people who make their own decisions. I'm Sean Aylmer. Enjoy your day.