The Global Biodiversity Framework, adopted in 2022, sets a global goal for countries to protect 30% of terrestrial, inland water, and coastal and marine areas by 2030. However, often used fixed income indices are tilted towards countries that are not aligned with this target. Our analysis shows how investors can optimise EM government bond portfolios to incorporate the 30x30 target.
Optimising the J.P. Morgan GBI-EM Global Diversified, we demonstrate that country weights can be adjusted to increase portfolio exposure to protected areas and ecosystem vitality, while maintaining the same yield and duration as the benchmark index.
This rebalancing can mitigate nature-related risks, but does require reallocation away from large issuers like China, India, Indonesia and Mexico.
