- 1 week ago
- #17
ESG Talk #17 - November 2025. The True Cost of Chocolate: From Nature to Finance
In the latest session of ESG Talks, we took a closer look at the hidden environmental and financial risks behind a product we all know and love — the chocolate bar. From cocoa to palm oil, many agricultural commodities are linked to deforestation and biodiversity loss.
The discussion covered:
• How deforestation-linked supply chains can impact portfolios
• What the new EU Deforestation Regulation (EUDR) means for investors
• How to assess and mitigate nature-related investment risks
In the latest session of ESG Talks, we took a closer look at the hidden environmental and financial risks behind a product we all know and love — the chocolate bar. From cocoa to palm oil, many agricultural commodities are linked to deforestation and biodiversity loss.
The discussion covered:
• How deforestation-linked supply chains can impact portfolios
• What the new EU Deforestation Regulation (EUDR) means for investors
• How to assess and mitigate nature-related investment risks
Category
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LearningTranscript
00:00Good morning, everyone, and welcome to the 17th edition of Kandrium's ESG Talks.
00:12My name is Marie Limczyk. I'm Head of ESG Client Portfolio Management at Kandrium, and I will be your host today.
00:18As you may know, Kandrium's ESG Talks series brings together a variety of eminent experts to discuss unique insights in key issues in the matter of sustainability.
00:34And the title of today's talk raises the question of the true cost of chocolate.
00:39So naturally, in preparation of this discussion, I actually took a trip to the chocolate and candy aisle of my local grocery store.
00:47And on the same shelf, I came across three different types of chocolate candy bars.
00:55There was one with palm oil listed as one of the ingredients, one with a label for sustainable palm oil, and another one with no palm oil and actually also no cacao.
01:06It was, in fact, based on cacao-free chocolate.
01:09So in today's talk, we will look at the links between the food that we consume, the agro-production that supports it, and the issues of deforestation and loss of biodiversity.
01:23And we will explore if and how these links should matter to us not only as consumers when we select our food products, but also to us as investors.
01:33And to explore these issues, we are lucky to have with us three experts on the topic.
01:39Isabelle Chalon is Kandrium's corporate ESG analyst for food and beverage, food retailing, hotels and restaurants, as well as consumer durables.
01:48Welcome, Isabelle.
01:49Alex Dietishheim is ESG stewardship analyst in Kandrium's engagement team.
01:55Alex, you focus in particular on engagement with companies on environmental matters.
01:59Thank you for being with us here today.
02:03And Elouane Oehrar, ESG analyst focused on biodiversity.
02:08You developed notably Kandrium's proprietary biodiversity model.
02:12So thank you for sharing that expertise with us today.
02:16Before we hear from Elouane, Alex and Isabelle a few housekeeping points, please note that this webinar is being recorded and a replay will be shared with you and also available on our website.
02:28And you're welcome to ask us any questions at any time in the Q&A functionality of teams.
02:36We will try to address as many as we can at the end of the discussion.
02:41But let's first start with one of the concepts that I mentioned before, biodiversity.
02:47So what often comes to mind first when we think of biodiversity is the diversity of human and natural life.
02:56But I was wondering, is that actually all there is to biodiversity or is biodiversity more complex than that diversity of human and natural life?
03:07Elouane, could you maybe start us off with a quick definition?
03:10Yeah, good morning, everyone.
03:14So what you have here is a very heavy definition from IPBES about what is biodiversity.
03:21For those who don't know, IPBES is like the IPCC for climate, but for biodiversity.
03:27So to make it more simple, biodiversity is all the variety of life, from genes, diversity, through specific diversity, which is diversity within species, and ecosystem diversity.
03:41But the most important things to get is that it's not just about listing all the things living on Earth, right?
03:48It's what really matter is how all these things interact within each other.
03:54So that's where the real complexity comes in.
03:58So when you try to represent biodiversity, you need to think about a very highly complex network with all the scale of diversity from genes to ecosystems interact within each other.
04:10So think about a network.
04:12So it's a very complex notion to apprehend, even for scientists and ecologists, especially when, you know, we only have repair to it, like 25% of all the species that could be living on Earth at best.
04:29So in other words, we don't really know biodiversity, in fact.
04:34So working on biodiversity requires maybe a little dose of humility, I would say, working on that complex subject.
04:43And actually, speaking of humility, you know, one thing that can be quite humbling for us humans is the recognition of biodiversity erosion.
04:53Can you give us a quick overview of this decline of biodiversity and its scale maybe as well?
05:02Yeah, so I just said we don't know biodiversity, but there is something we know pretty well, is that biodiversity is catastrophically decreasing.
05:10So there will be a lot of examples to illustrate that.
05:15Extinction rates going up, population of species going down.
05:21Localised example, like we lost 75% of insect biomass in Germany in 30 years.
05:27But maybe the one that blew my mind is like 50% of terrestrial land on Earth are artificialized.
05:35Like, I mean, Earth is a big thing, you know, like there is Antarctica on Earth.
05:39And yet, 50% of all the terrestrial land are used for human activities.
05:45So that's astonishing.
05:46But if we look more in details, let's say there is differences depending on where you live.
05:54So, for example, in South America, they have lost 90%, 90% of vertebrate populations in the past years.
06:05By comparison, it's between 20-30% of loss in North America and Europe.
06:11So there is huge differences.
06:14So maybe the last thing I wanted to highlight before we move on is biodiversity is a network, right?
06:23But it's not isolated from our human system and so our economic system.
06:29And so the inequalities we will find in our economic system, especially between Global North and Global South,
06:35are also reflected in the biodiversity loss and the biodiversity impacts.
06:41Maybe to just conclude with a quote from Rachel Carson 60 years ago with the book Silent Spring,
06:48that, like, summarizes what we have just said.
06:51In nature, nothing exists alone.
06:55Yes, and the facts and figures that you just quoted are, in fact, quite astonishing, quite staggering.
07:03So this, of course, begs the question then.
07:05What are the drivers of this erosion of biodiversity?
07:10Erwan?
07:11Yeah, so IPBES, so remember, the IPCC for biodiversity has published a lot of reports,
07:19and one of them, I think it was like five years ago, something like that,
07:23like, illustrates the five main drivers for biodiversity loss.
07:27So what are these drivers?
07:30So all one cause human activity always, but those five main drivers are,
07:35so the first one is land use change so for example you take a one piece of land and you change the use
07:42you have on it so you take a forest and you convert it into a field you take that field you convert it
07:48into a city you have a change of the land use and so you have an impact on biodiversity
07:54then you have direct exploitation you exploit too much and you don't have biodiversity anymore
07:59overfishing for example and then you don't have fish anymore well you have climate change and
08:05i'm pretty sure this one you know it pretty well like climate change because you will change the
08:09physical properties of one ecosystem like the temperature and so either the species can adapt
08:16or move or they just can't live anymore in that place and so this is disappeared population decrease
08:24then you have pollution so pollution is maybe like the wider topics within the drivers and sometimes
08:31some people criticize ipbs for that because it's like too wide in pollution you will have light
08:37pollution noise pollution plastic pollution like chemical pollution like pesticides and fertilizer use
08:44so you have a lot of thing in pollution but huge impact on biodiversity and then the last one maybe the
08:52trickiest is invasive alien species so what is an invasive alien species you take a species from one
08:59ecosystem you put it in one ecosystem you put it in another ecosystem in this new ecosystem the species
09:04doesn't have any predators maybe and so start to multiply multiply and multiply and at the end these
09:11species multiplied too much and took all the resources of the ecosystem and so you unbalance the
09:17ecosystem means everything is about balance right so you have an impact but to be honest on this one there is a lot
09:25of debate on how we need to deal with invasive alien species what if what is an evasive species so even ecologists
09:33and scientists still debate on that point but still have a huge impact on biodiversity
09:41thank you i want to zoom in on one of the factors that you mentioned which is land use change
09:47so as far as i understand deforestation is a big part of changing the state and the usage of land
09:53development isabel can you maybe help us untangle how deforestation ties to our consumption patterns
10:02what are the value chains in question here what i'm wondering at the end of the day is you know are
10:08we eating away at our collective futures through some of the products that we consume yes actually
10:16there are several causes to deforestation such as the construction of roads the expansion of cities
10:21or forest degradation but clearly the biggest source of deforestation is commodity driven and the eu is
10:28today the second largest importer of tropical deforestation after china and is today responsible
10:35for 16 percent of the deforestation associated with international trade and between 2005 and 2017
10:43eu imports caused 3.5 million hectares of deforestation which is more than the size of belgium
10:50soy palm oil and beef are the three commodities with the largest embedded tropical deforestation
10:57imported into the eu followed then by cocoa and coffee soy is used at 80 percent for animal feed in
11:05europe and cocoa and palm oil are present in our everyday lives in chocolate of course palm oil is
11:12present in a lot of products that we and our children eat like cakes uh cereals margarines stock cubes
11:19crisps and spread so yes when you drink coffee or eat chocolate bar it can be at the expense of some
11:26forest on a positive note the level of imported deforestation in the eu has diminished significantly
11:33over the years by around 40 percent between 2005 and 2017. yes and it's good to hear both about the
11:42negative impacts of course because we need to grow our conscience on those but it's also interesting to
11:48hear that there are areas where certain improvements can be observed but i want to briefly circle back
11:55to you eluan the commodities that isabel just described and their consequences for this deforestation
12:02is all of this just an environmental issue or are there social implications as well
12:09of course there is social implication remember everything's connected
12:14for cocoa specifically for example it's a commodity where we have an oligopsonic situation so just for
12:21everyone monopoly you have one seller monopsony you have one buyer so oligopsonic you have few buyers
12:28so this situation is in hard glass shape like this so you have millions of producers on one side millions of
12:36consumers on the other side and at the middle you have only
12:40few big trading companies and retailing companies that have a massive power on prices and on margin
12:48so you have inequalities and is in the share of the added value because you have traders from
12:56manufacturers that take between 10 and 30 percent margin on the final product
13:02and we talk about farmers that only took between zero to one percent margin so it's cause social justice
13:09issue we talk about farmers that have nearly 200 american dollars per year to live like it's well below
13:16the poverty threshold and so in this situation farmers can't invest in anything they don't have any money
13:23so they can't invest in crop rotation they can't invest in climate change adaptation they can't invest
13:30in natural disaster resilience for example so they can't do any any of this and so
13:36if you are a farmer you don't have any money and you want to increase your revenue so you need to
13:40increase your production so you can't do it by increasing the yields of the existing production because
13:46you can't buy fertilizers so what is the only solution you have it's increasing the size of the
13:53plantation so going in places where the soil is good quality to have better yields but where is the soil
14:00of good quality it's in natural forest and it's in protected area and so in that situation we see a
14:07direct link between the inequality inequalities within the share of the value poverty and deforestation
14:16so in that specific example of cocoa it's not wrong to say that maybe the solution to hard deforestation
14:24and to fight against biodiversity loss is to fight against poverty at the first place
14:29okay very clear so now we've seen the effects of certain commodities on deforestation on environmental
14:39and social matters but i would like us to shift perspectives a little bit now and look at the
14:45question of if biodiversity also impacts investment portfolios so so in other words if we shift perspectives
14:52and look at the matter from a purely economic perspective from a risk return perspective should
14:58investors concern themselves with this at all in one maybe you can share some insights yeah of course
15:07so there's a slide i think with it so when we think about it uh it's obvious uh that everything's
15:16connected and so as financial institution we invest in corporates and those corporates well will have
15:23impact on the environment from one side so think about metals and mining companies that will consume a lot
15:30of water that will pollute the soil but also those corporates depend on biodiversity so because metals and mining
15:38companies will require water to just like function and so this is what we call double materality
15:44double materalities impact and dependencies and those impacts cause risks because you will have transition risk
15:51just imagine the regulation change and now you have to compensate your consumption of water your
15:57biodiversity loss it will require a huge amount of money and you have physical risk from dependencies for
16:04example you don't have enough you don't have water anymore well you can't have your economic activity
16:10anymore or salt quality decrease your yield will decrease or there is no pollinators left where there is no fruits and
16:16vegetables anymore so yes double materality impact and dependencies so as financial institution we need
16:24to take care of that and when we do what we call biodiversity assessment we need to take care of we need
16:31to look at the impact and the dependencies
16:37okay so given the importance then of this matter for both the sustainability of our life on this planet and
16:44then also from a financial and investment perspective
16:48the question that comes to my mind is that of regulation you know have we as a society
16:53regulated this and actually can these issues be regulated and maybe what would be necessary for
16:59regulation in this space to actually be effective um maybe Alex can you give us your views on this
17:07yeah and i'll take maybe your question from the other way around and start with what is an efficient regulation
17:14because that's an actually that's a very interesting question an efficient regulation is one that sets
17:19clear goals translates them into enforceable rules and ensure that those rules lead to measurable lasting
17:25outcomes so it relies on solid evidence involves the right actors and includes mechanism to monitor
17:32progress and adjust course when needed applied to biodiversity regulation must then do more than just
17:39restrict harmful behavior it should actively guide and incentivize ecosystem restoration sustainable resource
17:47use and the protection of critical habitats so this requires measurable biodiversity targets
17:54enforceable management plans regular impact assessments and incentives that reward responsible practices
18:02and if we look at the current global and european frameworks regulating biodiversity they
18:08generally reflect these principles we have the kunming montreal global global biodiversity
18:14framework that outlines 23 targets for 2020 uh 2030 sorry including for instance corporate disclosure
18:22obligations on nature biodiversity risks we have the eu nature restoration law from 2024 which mandates
18:31restoring 20 percent of degraded land and sea by 2030 and we have the famous eu dr so the eu deforestation
18:39regulation which seeks to eliminate deforestation linked imports through strict due diligence requirements
18:46on commodities such as cocoa soy coffee palm etc notably the eu dr introduces real accountability because they
18:55introduce fines product seizures and even sometimes exclusion from the eu market for
19:01non-compliance and non-compliance however as we've seen efficiency on paper does not guarantee
19:07effectiveness in practice and the eu dr has faced repeated delays originally planned for december 2024 it was then
19:16pushed back to end of 2025 and now to end of 2026 for large companies and mid-2027 for small medium enterprise
19:26and these postponements they stem from political pushback but also administrative burden concerns
19:32and technical issues such as it system readiness so this highlights the persistent gap between regulatory
19:39ambition and the implementation capacity and this gap matters because delays weaken credibility it frustrates
19:48companies that are already prepared to comply and it also risks overall slowing progress towards
19:54biodiversity goals so they show that efficient regulation requires more than just strong design it demands
20:03adequate resources political will operational systems and consistent enforcement so we have to strengthen this regulatory
20:13environment we have some complementary initiatives such as disclosure frameworks like the tnfd the cdp or the csrd
20:21and we also have certifications such as the responsible sustainable palm oil or rainforest alliance for cocoa that can support compliance
20:30in short because i can talk about this for a long time biodiversity yes it can be regulated but doing so efficiently requires more than just well crafted goals and rules it demands full alignment of ambition with capacity and efficient regulation is therefore not just a single instrument but a system one that requires
20:50one that requires balance with rigor and practicality and that continuously adapts as science markets and ecosystems evolve
20:59and only through this integrated approach can regulation truly drive lasting biodiversity protection and restoration
21:06yes yes actually i want to come back to um something that you mentioned in in your answer just now and that is the certification frameworks
21:15you know those that we see on our grocery store shelves um i wonder can consumers and investors actually rely on them to any extent um maybe ilwan what's your view on this
21:28yes yeah so i think everyone here will agree there is a lot of certification schemes and sustainability labels everywhere but maybe let's ask the question okay
21:42are they efficient or the it's does it work right so uh according to some studies on it because we have like a track record of 50 years of certifications
21:53well impact on farmers lives are pretty limited it's not zero it's not zero but it's not as expected
22:03so okay let's ask the real real question why so to get it we need to zoom in a process we call commoditization
22:13that's basically the process where a crop grown in a field turned into a standardized global commodity on the global market with
22:21grades specs uh standards and everything so if you're a company that requires a massive amount of
22:31agricultural commodities cocoa for example well you will buy on the bulk market that means you expect
22:38every batch of cocoa beans to be more or less the same you have a kind of an homogenization of all the
22:45culture and of all the crops right so that's commoditization so with modern sustainability
22:53certifications it started to popping up in 1960s so it's quite old actually like the first certification
22:59it's like now it's 60 years old so at the beginning it was supposed to break the system like fair trade fair
23:08trade certification was used to separate the supply chain and so at the end you had a supply chain
23:15directly from the from the producer to the consumer so that was the first certifications in practice
23:24but in the 1990s things shifted let's say with rise of labels and third-party certifiers and a booming demand
23:36for organic products we basically saw re-commoditization process so we were going backwards re-commoditization
23:47by making every farmers eligible to apply for certifications well we reintroduce competition among
23:55farmers right and so basically we took the global market the bulk market and we create a certificate but
24:02bulk market but the roots of the problem was still there like you can substitute all the farmers and
24:09so you increase the competition against the farmers and yet it's the same systems that keep the price low
24:17and so because you don't fight against poverty in that case you don't fight against like biodiversity loss
24:23as i just explained so today what we have think uh what we have seen sorry is that the approach that
24:31actually makes a difference for farmers incomes and sustainability so as a consequence are strong
24:38vertical relationships so directly from the producer to the consumer so it's key with transparency
24:46so you need transparency among the supply chain and directly link with the producers and not like rely
24:51on the global bulk market even if it's certified it doesn't work really well right so i feel like
24:58we find ourselves in a little bit of a dilemma here right because so we understand the importance of the
25:04matter for our environment and for our society but we've also seen that from an investment point of view
25:11this is quite a critical matter and it can impact our economies our investment portfolios but then at
25:17the same time we've seen that current regulation certifications has a lot of limitations so then
25:25you know i get to the question too of how can investors even apprehend and assess these issues
25:33when they're making investment decisions and i want to turn to you isabel maybe you can share a little
25:38bit about how you go about this in your analysis on a day-to-day basis sure so first i propose to
25:46explain how our methodology to evaluate companies from an esg point of view works so we start with a
25:53macro analysis or analysis of what the company is doing to be completed later by the how it is doing
26:00it so it's an evaluation of the business activities of the company in relation to various issues which
26:07we call key sustainable challenges and which you can see in the left part of the slide those key
26:15sustainable challenges are for the food sector health and wellness climate change and resource depletion
26:21the impact of on the of the food sector on planet resources is huge as the agricultural sector is
26:27very dependent on commodities such as palm oil soy cocoa and also cattle production for dairy products
26:35so food companies will rank poorly over resource depletion particularly if they are involved in
26:41commodities that are tight to deforestation and also on climate change due to the high ghg emissions of the
26:48sector then we will start to look at a more micro level and we will dig into the company itself and
26:55how it treats its various stakeholders the stakeholders that we take into account vary according to subsectors
27:02and you can see them on the right of the slide but you will almost always analyze the environmental
27:08stakeholder in the food and food retail sector due to their complex supply chain the suppliers are also a key
27:16stakeholder which we analyze both from an environmental and also from a social point of view so deforestation
27:23and biodiversity will be tackled in these two sections regarding deforestation our first step
27:29is to evaluate the company's sourcing policies we expect companies to identify priority commodities
27:36and set time-bound targets to achieve a hundred percent sustainable sourcing we also want to see a zero
27:43deforestation policy with an implementation timeline and a governance structure that oversees it ideally a
27:51dedicated committee reporting to the board a critical element is traceability companies should be able
27:59to trace commodities back to the mill or preferably to the plantation or the farm and this level of traceability
28:08will be essential for compliance with the eu deforestation regulation we also look at the percentage of certified commodities
28:16and the level of certificate certification as within one scheme notably rspo for palm oil you can have
28:24very different traceability levels and these certifications can be complemented by the use of technology
28:31such as satellite imagery and geolocation mapping of course in our analysis we will check if there are
28:38environmental or social controversies which can show a different reality to what the company is telling
28:45and we will also analyze suppliers on the social side cocoa and palm oil often carry risk of forced labor
28:53child labor or other human rights violations so companies should have a strong supplier code of conduct
29:01aligned with international standards and they should actively engage their suppliers through financial
29:07and technical support and also training in terms of transparency we expect companies to disclose sourcing
29:14countries key suppliers and lists of suspended or removed suppliers and the due diligence should ideally
29:21ideally reach second-tier suppliers and not just the direct ones companies should also ensure fair wages
29:30conduct supply chain audits and publish human rights impact assessments companies must maintain public grievance
29:38compliance mechanisms to detect violations and manage non-compliance if an employee from a farm is
29:44victim of human rights abuse he should be able to signal it and there should be a defined protocol for remediation
29:53yes thanks for sharing this methodology in fact it's very multi-faceted and very detailed i think it's not
29:58surprising when we know the complexity of the issue of biodiversity and deforestation and i think now we are all curious to actually hear about some concrete
30:08cases um could you give us some examples of companies um that you've analyzed in this way um maybe
30:15some companies that are actually displaying improvements or best practices in this area
30:22yes i can mention a major food retail company in europe which has shown best practice in terms of
30:27biodiversity assessment the groom has the group has done a mapping of its biodiversity impacts and dependencies
30:35in its value chain it calculated its biodiversity footprint using the cbf tool the corporate
30:42biodiversity footprint which provides a quantified impact value and the analysis showed that 94 percent
30:50of the biodiversity impact comes from the production of the food sold particularly meat and dairy and brazil is
30:59the country with the highest impact due to its reliance on beef its extensive production
31:05model and significant deforestation risks in a region of high biodiversity on deforestation the group has a
31:13commitment for 2026 it helped design a methodology with the consumer goods forum to assess traders
31:20deforestation policy in its supply chain and it also applies a zero deforestation approach to its key commodities
31:29they have also created a forest committee against deforestation in brazil which is
31:34chaired by two exco members and they introduced the pre-approval process for beef suppliers and as
31:42the result the proportion of its deforestation free own brand beef grew threefold to above 90 percent so it is
31:50on track to meet its 2026 target of being deforestation free however challenges remain for cocoa and soy which are
32:00both around 30 percent deforestation free and i can also mention a major european food producer very
32:09active in dairy the company is tackling deforestation very seriously and works very actively in favor of
32:17the transition to regenerative agriculture and we see that as key for the long-term sustainability of the
32:24food system regenerative agriculture provides security of supply quality of ingredients and the farmers are less
32:31reliant on fertilizers and so reduce their costs so the company works with 60 000 farmers over the world and they have
32:41targets to source 30 percent of their key ingredients from farms which started the transition to regenerative agriculture and they are already above the target
32:53they support their farmers through financial and technical help innovation programs and put in place long-term contracts
33:01with them to ensure financial viability as they know it's quite a challenge to transition
33:07the company has a zero deforestation commitment and a very detailed forest policy it's making real
33:13transparency efforts and disclosed the deforestation alerts it receives in 2023 it registered 11 alerts linked
33:24to deforestation and human rights violations 10 of which were related to palm oil and they target to have fully
33:32traceable and deforestation and conversion free supply chains by 2025 in their five priority commodities
33:41on palm oil they provide full supplier transparency with the list of the mills and plantations which is quite unusual
33:50they have a hundred percent traceability to mill and 98 to plantation
33:55on cocoa they mostly use the rainforest alliance certification and they are currently around 70 deforestation free
34:04so we see in these examples that there has been a lot of progress in palm oil but but less so on cocoa
34:12and for us it is key that this transparency applies to all major commodities
34:18an interesting point is that we are starting to see companies integrate biodiversity in their remuneration scheme
34:25in a different sector we saw a major european luxury good company include a kpi on the conversion of its supply
34:32chain to regenerative agriculture and another kpi on water land and biodiversity regeneration programs
34:42thank you isabel it's great to hear from such examples actually showing that improvements are possible
34:48when companies commit and put in the effort but of course you know that's not the case for all companies
34:56so maybe what would be useful for the audience would be to hear a little bit about what potential
35:03red flags would be or sources of risks that investors should pay particular attention to
35:10yes for us the biggest red flag is the lack of transparency most companies now have nice websites and
35:18sustainability reports with a lot of green pictures but you have to dig deeper than that and look for actual
35:24targets and results investors should be wary of companies that have no commitment to zero deforestation
35:32or weak ones like commitments without time-bound targets or commitments that exclude their key commodities
35:38and as mentioned some caution is necessary as regards to weak certification schemes on when there are no
35:46certifications at all it's also interesting to look at the regions where the company is sourcing from
35:53regions of high risk like amazon and cerrado in brazil for example should lead to more scrutiny food
36:00companies involved in deforestation are often scrutinized by ngos so being subject to controversies is also
36:07something that must be seriously monitored and social treatment of suppliers is also a key risk for
36:13those companies due to the risk of child or forced labor in some regions thanks isabel i find these
36:21examples really show how in-depth analysis such as the one that you conduct can really serve as an
36:27essential tool to inform the investment decision and take into consideration the risks linked to deforestation
36:35um but of course active investing doesn't stop at the initial investment decision and here i want
36:42to turn to you alix can you give us a little bit of an insight into the role of stewardship
36:51um well for those who don't know what is stewardship as shareholders we have rights which allows us to
36:58question companies and vote at general meetings and so as active investors this means maintaining an
37:08ongoing dialogue sometimes directly with the company or sometimes collaboratively and requesting additional
37:16information greater encouraging greater disclosure or sometimes also challenging companies practices or
37:23their long-term strategies and biodiversity is one of the seven key engagement themes of condrams engagement
37:30policy we expect issuers to put in place an adequate management of biodiversity based on the company's specific
37:37exposure to biodiversity risks and impacts actually could you give us an example of how you engaged with companies on
37:46matters linked to deforestation and biodiversity yes um well following the eu dr's announcement
37:53in 2023 for instance we were curious to assess the readiness of companies to the requirements of the regulation
38:00so we decided to launch a commodity specific engagement starting with palm oil as it is the most widely used
38:07vegetable oil and that the expansion of palm oil is recognized as a major driver of deforestation
38:13and land degradation so we engaged companies across the whole palm value chain to better understand best
38:20practices of the market and how compliant they were with the eu dr's demands overall the engaged companies
38:27demonstrated satisfactory progress whether it was about governance traceability or biodiversity disclosure
38:35related to palm oil however one of the learning outcomes of this campaign is that the rspo
38:40certification that we've talked about a lot in this talk for instance which is the main certification
38:45used by companies does not go as far as the eu dr requires in terms of traceability so there is room
38:53for improvement here and another learning outcome that came from this engagement campaign was that many of
39:00the highly exposed companies we've talked to expressed concerns that the postponement of the regulation was
39:06creating a competitive disadvantage for these firms that are already invested in traceability and
39:12compliance systems as well as sending an overall counterproductive amid the global climate and biodiversity
39:19crisis so as a result of this campaign we've actually chose to exclude some companies that had material
39:27exposure to palm oil from our sustainable investment universe due to either persistent lack of responsiveness on
39:34engagement as well as inaction regarding their deforestation risk
39:41so this was an engagement campaign driven by khanriam could you also share your experience with
39:47some of the collaborative engagement initiatives that uh we often hear a lot about in the press and so
39:53forth yeah of course so we're part of uh well one of the major uh collaborative engagement on nature is the
40:00nature action 100 which is a collaborative engagement initiative that was actually launched
40:05in 2022 at the un conference of biodiversity the cup 15 in montreal
40:11it takes its inspiration from climate action 100 plus so it regroups 240 investors
40:18that collaborate on nature-based engagement with a hundred companies that are deemed to be
40:23uh those that have the greatest impact on global biodiversity and ecosystems there was the first
40:30evaluation of all these companies that was done based on their ambition their assessment of biodiversity
40:36impacts risk dependencies and opportunities the targets that they had how they implement those
40:41targets as well as their governance structures and most companies express a commitment to protecting nature
40:48but only half have set nature related targets and most outline some strategy to achieve them
40:55but only one company has been recognized as having actually conducted a comprehensive nature related
41:01materiality assessment so na100 is still in the early days of the collaborative engagement
41:09but already in its status report from this year it showed that all hundred companies have been met
41:15and 50 of them these companies have started initiating plans to address their impact on and exposure to nature following engagement uh discussion with investors
41:26and a 100 considers that around one third of the targeted companies have begun to make significant progress
41:32on the initiatives expectation so it's already a good start
41:38thank you i find like the three of you have drawn a very complete picture starting with
41:44the issue of biodiversity loss the role of deforestation we've seen how and why this is an issue for us as a society for the sustainability of life on this planet but we've also talked about why and how this is a material issue for investors with a lot of financial materiality
42:03we've seen that the regulatory and certification frameworks today are not
42:07um as complete as we would maybe like them to be to fully rely on them and hence the importance of
42:15in-depth esg analysis and also engagement to really apprehend and understand these issues and be able to
42:23also support companies going in the right direction and so thank you very much for that i now want to open it up
42:30um to any questions from the audience so please don't hesitate um to send them to us um you can also you
42:37can use the chat for example um i want to start off with one question on metrics and measurement that's not
42:45something we have spoken about a lot yet um when it comes to climate and global warming the investment
42:52community has for many years now worked with co2 metrics and greenhouse gas emission measures with
42:59decarbonization paths with decarbonization paths with net zero goals what about such metrics and goals when it
43:05comes to biodiversity maybe i'll turn to you in one yeah i can take this one so we often have the question
43:14about okay would it be suitable to have like the co2 kilogram of co2 equivalent as this kind of metrics to
43:22drive like as a global goal drive international like regulation and international
43:29pathway uh unfortunately it won't be possible with biodiversity for some reasons like first it's
43:36not the same kind of impact so i won't enter in too much detail but just to summarize okay we have
43:44kilogram of co2 which is an impact but it's physical uh no it's physics i mean let's say it's what we called
43:52a midpoint impact and biodiversity is a damages what we call an endpoint
43:58impact and so it's not the same category of impact for a lot of reasons so first biodiversity is like
44:06too much indicators in like one field so just imagine you're going to your like physicist to
44:12the doctor and he told you okay you're not in good health you have a health indicator of 15. okay so so what
44:21so you you want to know your blood pressure you want to know your internal temperature it's not like
44:26in a health indicator like one health indicator doesn't mean anything same for biodiversity you can't
44:32summarize all the complexity of biodiversity into one indicators and secondly it's the location specific
44:42it's location specific so one kilogram of co2 has the same power to warm the atmosphere
44:50either if it's a chinese u.s european kilogram of co2 it's the same it's one kilogram of co2 for
44:57biodiversity is way more complex so one cubic meter of water consumed has not the same impact on biodiversity
45:04depending on if you're in a desert in a forest or in a city same for land use it's it doesn't have the same
45:13impact everywhere because it depends on the local state of biodiversity so you have this location
45:20specific and this is where it tends to be quite complex for companies and even asset manager because
45:28you need to take into account this location specific data in a reporting where it's not something we used to
45:37like dealing with geospatial data but now it's something we need to to take into account and so
45:43it's like in progress there is a lot of progress in in that field but this is why it's very difficult and
45:50this is why maybe we won't have like never one only indicator for biodiversity but we have a spectrum of
45:58indicators like it's not like very convenient it's quite complex but we can work with that we have a
46:05spectrum of a spectrum of a lot of indicators we follow different type of indicators depending on
46:10the situation depending on the impact depending on the location we just need to be used to that
46:18because we won't never have one single indicators on border ST right and we all know that ESG is a
46:24discipline right that had had to get used to working with limited and heterogeneous data and maybe
46:32keeping on this overall idea of targets and goals but from another perspective
46:37Alix you mentioned that dialogue with companies can be a long progress
46:42um a long process and that progress is sometimes quite slow but how do you integrate targets into
46:51your process to measure if engagements are being effective albeit over a longer term horizon
46:58um and what you do if an engagement proves not to be effective
47:05yeah um well it depends on the type of engagement campaign we're doing i would say
47:10some campaigns are more about uh better understanding the market practices like the
47:15one i talked about on palm oil so therefore this type of campaign is more exploratory we will collect
47:21best practices and then we'll share them with engaged companies and monitor whether the companies
47:26implement these best practices or not so this would be considered a success if one company
47:33applies these type of best practice after an engagement with us for na100 it's a bit different
47:40because there's an existing benchmark that really evaluates the company's performance based on specific
47:46criteria and on this the engagement therefore is based on this assessment and we're trying to push the
47:53company to either disclose more to get a better grade in one of the criteria or to adapt their
47:59practices to get a better grade in another area and this would be how we would track targets uh progress
48:05basically and we have different tools of escalation we're always going to start the dialogue with an email
48:13or a letter it can also be a question at the agm if the company is not responsive to our private dialogue
48:20on the voting side we could vote against a management resolution some companies for instance file their
48:27biodiversity strategies at the agm so a say on biodiversity we can also choose to vote against
48:34some other management resolution board members if there are some board members responsible for
48:39biodiversity oversight or the non-financial reports if we consider that the disclosure on biodiversity is not
48:45sufficient up to i would say removing a company from our investment universe but that is something that
48:53is done with the sectorials esg analyst opinion right and actually maybe to get a little bit more
49:02detail on that cooperation between the engagement analyst and the esg corporate analyst isabel how do you
49:10integrate the results of an engagement process such as the one that alix just described into your overall
49:18assessment of a company yes so we fully take part in the engagement campaigns we help choose companies
49:25which will be targeted by the campaign we participate to the various calls and we work with the engagement
49:31team on the conclusions and the information we have gathered from the campaign is generally very helpful to
49:38know better some subjects that companies do not spontaneously talk about and we will incorporate
49:45those findings in our esg analysis by updating our business activities and stakeholder analysis scores
49:52and therefore the final score and that could have implications on the final rating of the issuer
49:59and on its eligibility to different funds all right so really a continuous process from the
50:06hd analysis through to engagement and then the feedback loop into the analysis and the rating again
50:12it's very clear i want to shift gears just a little bit towards the end of this call one of the points
50:19that is often brought up when we talk about these topics and these value chains is the topic of food justice
50:28access to healthy food for a growing population is obviously very important
50:32and more broadly the issue of a just transition not just a transition but a just one is there a tension
50:40between changing consumption and production patterns to protect biodiversity on the one hand and on the
50:48other hand ensuring that we can nourish the world or do these things go hand in hand
50:56alix eloane what do you think yeah maybe i can start and then pass it on to eloane well well biodiversity
51:03protecting actions may appear to reduce short-term food production and but in the long run protecting
51:10biodiversity actually supports food security as said eloane the loss of biodiversity undermines
51:17the foundations of agriculture whether it's pollinator decline or soil degradation
51:22so i i would say that ignoring biodiversity creates deeper long-term threats to feeding the world then
51:30conserving it does but i'll see what everyone has to say yeah and maybe just to add a last thing is
51:37what we we wanted also a better repartition within the value chain so it's not even like
51:45just reducing the production or whatever just like uh spread the value across the value chain especially
51:52to the farmers uh there was some i want to highlight some say solutions that existed uh for example in
52:00Ivory Coast Côte d'Ivoire which is the biggest producer of cocoa they have a limited price a flat price on the cocoa
52:08uh by tons but um let's say this minimal price was supposed to help farmers but we know that some big
52:18trading companies uh succeed to let's say bypass this price by negotiating directly with cooperative
52:27and so even this kind of solution sometimes doesn't work so yeah it's it will be a complex
52:35aggregation of regulation maybe initiatives from countries that will help to like pass away for
52:42just transition uh in the future all right thank you um we're almost out of time uh so by way of
52:51conclusion i'd just like to ask you eloane uh alix isabel if you could give us in a nutshell maybe just
52:59two or three keywords that the audience should take with them today and just keep in mind going forward
53:05when thinking about biodiversity about agriculture and deforestation maybe isabel i'll start with you
53:13yes i would say commitment disclosure and traceability
53:17in one how about you yeah it's always hard to to summarize in three words but i'm sure the first
53:25one you you know it's interaction i just repeat this word uh it's a whole webinar but i would say
53:31social because we don't think about it enough when we talk about nature and regulation
53:39Alex how about your three key words to leave us with today i'll make a phrase out of it but
53:46pragmatic really regulation needed all right very clear call for action thank you um thank you to
53:54the three of us for sharing your insights and expertise with us today um and actually if you
53:59want to read more on the issues we just discussed you can find various research papers on the topic on
54:06the country on website there's a recent one on how to assess companies ecological debt for example and
54:13there is going to be a new one published in the next few weeks on deforestation linked imports with
54:19a particular focus on european regulation thank you everyone for joining and have a great rest of your
54:26your day bye bye
54:35you
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