The initiative will adopt a top-down approach to facilitate investor stewardship at focus companies.
Collaborative investor action through the much-anticipated Nature Action 100 (NA100), which is set to formally launch towards the end of June, is pivotal to effectively address the systemic risk of biodiversity loss, according to investors.
“When it comes to addressing nature-related risks, investors need to compare notes, work together, and send consistent signals to companies we engage with,” said Adam Kanzer, Head of Stewardship, Americas, at BNP Paribas Asset Management (BNPP AM), speaking at an International Corporate Governance Network (ICGN) webinar on 16 May.
“This is much bigger than just deforestation or unsustainable food systems; biodiversity loss needs to be at the centre,” he said.
Soft launched at COP15 last year, NA100 will serve as the nature-focused counterpart to investor-led engagement initiative Climate Action 100+ (CA100+). NA100 will identify and engage with companies that are considered systemically important to the goal of reversing nature and biodiversity loss by 2030.
“We’re still working out the selection process, but we will be focusing on the sectors that have the most impact on nature loss and drawing companies from that list,” said Kanzer, BNPP AM’s representative in NA100’s launching investor group, alongside Storebrand Asset Management, AXA Investment Managers, Federated Hermes, among others.
“We will formally launch NA100 at the end of June or beginning of July, which will include putting out the list of 100 focus companies and outlining our methodology,” he added.
Investor networks Ceres and the Institutional Investors Group on Climate Change (IIGCC) will run NA100’s Secretariat, while the Finance for Biodiversity Foundation and think tank Planet Tracker will lead the science council and technical advisory group.
Kanzer admitted that putting together NA100’s engagement priorities and methodology has been challenging, acknowledging that CA100+’s core engagement mission of driving down greenhouse gas (GHG) emissions allows for more streamlined requirements of companies.
“CA100+ can be very precise about it,” he said, noting that NA100 is going to take a top-down approach.
“Is there board oversight of the company’s impacts and dependencies on nature? Has the company done an internal assessment of its impacts and dependencies? Does the company have a strategy in place to manage these? Is the company lobbying in favour of nature-related data, regulation and policy?
“We’re going to lay out a whole list of detailed investor expectations for companies around these points, while Planet Tracker and Finance for Biodiversity develop individual pathways for different sectors and industries,” said BNPP AM’s Kanzer.
“NA100 is really having to get into the weeds in a way that isn’t necessary for climate.”
Tools and frameworks
Snorre Gjerde, Lead Investment Stewardship Manager at Norges Bank Investment Management (NBIM), noted that there are a number of existing biodiversity tools the Norwegian sovereign wealth fund is already applying across its 9,000 portfolio holdings.
One of the tools NBIM uses is the Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE) tool, which was developed by the Natural Capital Finance Alliance in partnership with UNEP-WCMC to help investors and other users understand and visualise the impact of environmental change on the economy.
“ENCORE has helped to give us an understanding of where our equity portfolio is dependent on ecosystem services,” Gjerde said.
“Of course, such tools do rely on assumptions and adaptations, but ENCORE does give us a sense of the significance of impacts and which companies are most affected, which helps us best focus our efforts when it comes to risk assessments and engagement.”
NBIM is also a taskforce member of the Taskforce on Nature-related Financial Disclosures (TNFD), which aims to develop and deliver a risk management and disclosure framework for organisations to identify, report and mitigate nature-related risks and opportunities.
“We are hopeful that TNFD will create a very globally consistent and scalable methodology that NBIM can use to inform its actions on how to manage the risks and opportunities related to nature loss,” said Gjerde.
TNFD published its fourth beta framework (V0.4) in March, with the finalised framework expected to be published in September.
“It may boil up to a global systemic risk, but biodiversity is always local,” said BNPP AM’s Kanzer.
“To sufficiently address [biodiversity loss and nature degradation], investors have to understand the risks at a local level. That means the challenges are more complex and each company is going to have to pursue different approaches and solutions.”