5. What Role for Sharks in Finance?

March 23th, 2020

The consideration of biodiversity by markets is far from being a reality, despite being a powerful lever for protection and a real risk for the markets themselves. "Biodiversity is not on the finance radar." Stressed three times by Hugo Bluet from WWF, this aphorism denounces a lag in finance, which is usually adept at transforming information into signals to be considered for investments. Yes, there is a real risk in finance: the loss of a function in an ecosystem can be sudden. For example, a disrupted trophic cascade can lead to the proliferation of algae, preventing tourism on all the beaches of an island for a season. This is predictable but not taken into account. In a recent article, the CNRS goes so far as to attribute the coronavirus crisis to the loss of natural barriers between species: species that have no trophic interaction in nature find themselves in the same market—this time, the food market—and devour each other, dead or alive, transmitting a virus in an improbable manner. Whether it's bats or pangolins, how are these species brought to coexist if not as a consequence of the loss of their natural habitats and usual food, pushing them to end up... in cities?

Finance is both upstream and downstream in this infernal chain. Upstream because it enables unreasonable bio-desertification for which no business leader would take sole responsibility. The reasons are financial: real estate, minerals, paper, etc. Downstream, other sectors are directly affected by the loss of tourists or a widespread drop in prices, as is the case currently. However, these risks have so far seemed too distant from specific investments for a financial consequence to be drawn. For climate, though, a real effort is underway: the "decarbonization" of investments seems to be becoming a reality. This is possible because the impact of each company can be measured, which is much more challenging for biodiversity. Indicators need to be developed to enable this effort under the assumption of market survival. In general, investment funds offer bundles of sustainable or ethical stocks. Therefore, there are investments that are neither sustainable nor ethical. A deeper question arises: Can we invest in destructive activities? How do we characterize the ethical, sustainable, or destructive nature of a particular action?

Even scientists who may feel distant from these issues have a crucial role: they are responsible for transmitting information interpretable by the markets. They must provide robust work leading to low uncertainties to trigger tangible actions.