Investors Increasingly Engage on Biodiversity09.07.2023
A coalition including business and finance organisations have launched a “Nature Positive” initiative this month as investors are engaging in biodiversity as well as climate.
Lauren Compere, head of stewardship & engagement at Boston Common Asset Management, told Markets Media: “There is definitely a movement for investors to go beyond climate and engage in biodiversity. We leaned into asking about biodiversity and deforestation risk in our bank survey back in 2018 and 2019.”
Boston Common Asset Management was founded in 2003 and is an independent, women-led and majority women- & employee-owned active firm looking to deliver competitive returns as well as social and environmental impacts.
In 2021 the fund manager signed commitments which have been integrated into stewardship and engagement – Net Zero Asset Managers Initiative; Finance for Biodiversity pledge and joining the Finance Sector Deforestation Action Advisory Committee. The committee has developed a set of investor expectations on deforestation that also incorporates factors such as free, prior and informed consent (FPIC) and the human rights impact. As part of these commitments the manager has been integrating more questions on biodiversity and deforestation systematically into engagement conversations according to Compere.
She continued that Boston Common Asset Management has focused on deforestation because about half of biodiversity impact comes from land use, for example, in commodities such as palm oil, soy cattle and timber.
“A lot of our conversations with companies are around how they are looking at their biodiversity risks and impacts and mitigating them,” added Compere. “That is still a question that most companies cannot answer with 100% certainty but I think expectations are becoming much more normalized.”
On 6 September 2023 nature conservation organizations, institutes, business and finance coalitions launched a ‘Nature positive by 2030’ initiative. This refers to halting and reversing biodiversity loss by 2030 from a 2020 baseline, through measurable gains in the health, abundance, diversity and resilience of species, ecosystems, and natural processes.
The goal of halting and reversing biodiversity loss by 2030 was codified in the Kunming-Montreal Global Biodiversity Framework in December 2022 and its adoption under the UN Convention on Biological Diversity has been described as the ‘Paris moment’ for nature. The initiative will advocate for and support the full implementation of the framework by governments and other stakeholders.
Tony Goldner, executive director of the Taskforce on Nature-related Financial Disclosures (TNFD) said in a statement that market interest in nature is scaling quickly following adoption of the framework.
Goldner added: “This Initiative is important and critically timed to provide all stakeholders with clarity about what ‘Nature Positive’ means and how business, finance and other stakeholders can contribute to the shared global challenge of halting and reversing nature loss with confidence,”
The Nature Positive initiative said a priority will be supporting the rollout of the common definition, metrics and standardized tools and practices that enable all to appropriately measure and report on their impact and contributions.
Last year Compere spent a lot of time assessing available biodiversity risk tools with her colleagues, especially those coming out of France where they have mandatory reporting. Article 29 of the French energy and climate law forces investors to publish their procedures for integrating ESG and includes mandatory reporting on biodiversity. Financial institutions have to measure their impact on biodiversity and change their investment strategy to reduce this impact if necessary.
She found there is not one single metric that investors can use for risk assessment so Boston Common uses different key performance indicators to understand the highest geographic and sector risks.
“We take a bottom up approach and focus on our holdings in order to identify risk and good practice,” Compere added.
With regard to climate related data, the Financial Stability Board established the Task Force on Climate-related Financial Disclosures (TCFD) in 2017 which set out a standardised framework for companies . In a similar fashion, there is a Taskforce on Nature-related Financial Disclosures (TNFD) consisting of more than 40 members representing financial institutions, corporates and market service providers with over $20 trillion in assets
“We are waiting for the TNFD’s final framework,” added Compere. “More regulators and stock exchanges are also having conversations around biodiversity as investors put more pressure on disclosures.”
She believes the TNFD disclosures will be much more difficult than the TCFD as it is hard to quantify data for biodiversity.
“Modelling has been very important for us but I am hoping that at some point we will not have to use estimation,” she said. “However, even in Scope 3 for climate most of the data is estimation.”
In August 2023 a high level scoping study from TNFD found that demand for nature-related data is growing quickly and a global nature-related public data facility could scale the availability, quality and maintenance of nature data. The review also found that new nature-related data technologies and solutions are emerging quickly, from satellite data to eDNA.
TNFD said: “The availability of accurate, comparable and decision-useful nature-related data is an essential prerequisite to address the global challenge of accelerating nature loss, to help organisations become more resilient in the face of nature-related risks, to deliver sustainable development for local communities and to facilitate the flow of capital to nature positive outcomes.”