Industry

NA100 Launches Sectoral Guide to Nature Engagement

With the proxy season approaching, the field guide aims to help investors ask companies in different sectors relevant questions on nature-related impacts and dependencies.

Global investor initiative Nature Action 100 (NA100) has released a guide to help investors better identify priority nature-related impacts and dependencies stemming from sector-specific activities, as well as strengthen engagement with portfolio companies.

The guide, produced in collaboration with sustainability non-profit Ceres, aims to enable informed dialogue between investors and companies to manage escalating nature risks and to mitigate nature and biodiversity loss. Through such discussion, investors can better understand the major sources of risk and how companies are addressing them.

“Over half of global GDP is reliant on nature, and institutional investors are recognising the real economy impacts tied to nature and biodiversity loss,” said Meryl Richards, Programme Director, Food and Forests at Ceres. “We saw a need to put together an accessible set of fact sheets for investors to bring into their engagements with a company to help both sides better understand the major impacts and dependencies for the sector.”

The guide, ‘Exploring Nature Impacts and Dependencies: A Field Guide to Eight Key Sectors’, focuses on the impacts and dependencies for NA100’s eight priority sectors, including biotechnology and pharmaceuticals, chemicals, food, and metals and mining.

NA100 members, which include more than 200 institutional investor members, representing over US$28.6 trillion in assets under management or advice, have identified these sectors as systemically important in reversing nature and biodiversity loss, within which it tracks 100 companies.

Material impacts across the value chain

Investor engagement with investee firms on nature risks has accelerated following the publication of the final disclosure recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD) last September. The TNFD guidance seeks to facilitate Target 15 of the Global Biodiversity Framework (GBF), which encourages governments to require disclosures on risks, impacts and dependencies on biodiversity. The GBF was adopted in December 2022 at COP15, which also saw the soft launch of NA100.

In addition to describing the primary activities associated with the sector and the major portfolio companies involved, the NA100 guide proposes a list of key questions for investor engagement. The baseline question for all sectors is whether the company in question has assessed material impacts and/or dependencies, including upstream and downstream in the value chain.

“We began by looking at the sector level and the different types of activities that companies are undertaking within that sector,” explained Carolyn Ching, Nature Director, Food and Forests at Ceres, which provides the secretariat for NA100.

“Breaking things down by sector allows us to have more granularity into the different impacts and dependencies related to those activities, which allows investors to have more informed conversations with those companies.”

Investors have regularly expressed the need for more granular data from the firms in their portfolios with the largest nature footprints.

“For businesses to credibly contribute to halting biodiversity loss, it is essential to adopt a sector-specific approach to nature action, recognising the unique ways different sectors interact with and depend on nature,” said Emine Isciel, Head of Climate and Environment at Storebrand Asset Management, a NA100 member.

“Moreover, understanding sector-specific material key risks and dependencies helps to identify potential risks that could affect operations or lead to financial losses in the future. On a more positive side, it can be used to identify opportunities for improving operational efficiency and reducing environmental impacts,” she added.

Although targeted at the finance sector and investors, Isciel believes that the guide also provides a good overview for all businesses to better understand sector-specific nature-related impacts and dependencies.

Piece by piece

To complement the guide, the NA100 Secretariat is working on an annual benchmark analysis of corporate progress against investor expectations, which will be released in the second quarter of 2024. “This will be another important piece of the NA100 puzzle,” said Isciel.

The guide’s launch comes at a pivotal time in the corporate calendar, with proxy season in sight. FAIRR Initiative (FAIRR), a collaborative investor network focused on sustainability risks in the global food sector, has predicted that more resolutions will focus on the impact on nature and biodiversity this year.

FAIRR reports that Green Century Capital Management has already filed resolutions at agri-food companies to start reporting in line with TNFD recommendations, while US shareholder advocacy group As You Sow’s ‘Proxy Preview 2024’ report identified five such resolutions. Water-related proposals are also expected to rise this year with increasing recognition of water risks in Europe and the US.

Richards and Ching are also seeing an increase in action on biodiversity and nature in shareholder proposals, and expect investors to look at engaging across the full suite of normal tactics. “There will be a lot of dialogue in the initial stages to build relationships with companies and to make the expectations of investors clear,” said Ching.

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