ESG investors shouldn’t ignore biotech’s potential to deliver change
The financial industry is undergoing an awakening. It’s the revelation that businesses that prioritize people and the planet can be just as successful–or indeed, more successful–than firms that focus solely on their bottom lines. That’s why the world’s biggest asset managers now evaluate companies on their Environmental, Social, and corporate Governance priorities, and allocate their capital accordingly.
In fact, ESG investing is rapidly becoming a driving engine of the entire financial industry. More than $120 billion poured into sustainable investments in 2021, up from $51 billion in 2020, which itself was a 25-fold increase since 1995.
The EU will soon require companies to publicly disclose their impact on sustainability. The Securities and Exchange Commission is considering similar regulations for U.S. fund managers. A study by Bloomberg projected that ESG investing could reach $50 trillion by 2025–fully one-third of all assets under management in the world.
Investors might be drawn to familiar green industries like electric vehicles or solar panel manufacturers, or explicitly socially conscious brands like Salesforce.com. However, many of the most valuable ESG investments are in more fundamental sectors: software companies that have gone carbon-neutral, cutting-edge waste management firms, and especially the diverse firms of the biosciences industry.
Biotech isn’t just about COVID-19 vaccines and the search for cures for cancer and Alzheimer’s, important as those are. The industry is also emerging at the forefront of the effort to fight climate change and to develop environmentally sound and sustainable products and techniques in areas such as agriculture and waste control.
Joyn Bio in Boston, which is a joint venture between Bayer and Ginkgo Bioworks, is engineering microbes that can extract nitrogen from the air and then deliver it to crops, obviating the need for traditional fertilizers’ energy-intensive manufacturing, transportation, and application.
Danimer Scientific is working with candy companies to make biodegradable wrappers out of plant oils. Several companies are using CRISPR gene-editing technologies to make fruit and vegetables more resistant to disease and more resilient in the face of climate change.
AquaBounty, based in Massachusetts, has developed advanced aquaculture technologies to create fully sustainable, land-based salmon farms that can be located in the middle of the United States or Canada, far from the ocean but closer to millions of consumers. They will benefit from a fresher product while greatly reducing the carbon impact from shipping.
Bioscience firms are making jet fuels out of algae and used cooking oil, developing carbon-cutting computing technology, and continuing to improve carbon capture and sequestration methods to offset the CO2 that has already been emitted.
More companies have been entering this space in the past few years. Colorado-based Living Ink recently debuted textile and packaging inks made from algae, rather than petroleum. Mori, a company in Boston, has started using silk proteins to create edible protective layers that help meat and produce stay fresh for longer and eliminate the need for plastic packaging.
These companies aren’t publicly traded, so they don’t yet offer opportunities for all investors to bolster their ESG portfolios. But they’re surely a sign of things to come.
Indeed, a recent report from BIO, the organization I work for, found that by 2030, biotech’s green initiatives could mitigate the equivalent of three billion tons of energy-based carbon dioxide emissions a year–about half of current U.S. emissions. BIO is also committed to sustainability on the policy side as well, having submitted several recommendations to the SEC to help the agency develop ESG reporting requirements for U.S. businesses.
As exciting as many green start-ups certainly are, traditional sectors such as agriculture, energy, manufacturing, and transportation will be the most important industries for ESG investing. All of them are entwined with or dependent on the biosciences. In our interconnected world, every industry must become sustainable.
Biotechnology is a principal means to that end, pointing to cleaner, greener and fairer ways to create, distribute, and consume the world’s indispensable goods.
Institutional and individual investors, whether seeking to round out ESG goals or to entirely reorient their post-pandemic portfolios around social justice and sustainability, should take a fresh look at what biotech has been up to lately: creating a sustainable way up from the pandemic, climate change, and poverty.
Michelle McMurry-Heath is a physician-scientist and the president and CEO of the Biotechnology Innovation Organization. Joyn Bio and AquaBounty are members of the BIO.
The opinions expressed in Fortune.com Commentary pieces are solely the views of their authors, and do not reflect the opinions and beliefs of Fortune.
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