Nature Action 100 and PRI’s Spring to liaise closely to avoid duplication when engaging with investee firms on nature risks.
Nature-focused investor engagement initiatives have committed to “build up as well as out” from existing sustainability-led stewardship programmes, in line with regulatory encouragement to increase collaboration.
Speaking at ESG Investor’s Nature Data for Institutional Investors event, Tim Steinweg, Head of Stewardship – Nature at the UN Principles for Responsible Investment (PRI), said its Spring programme – launched last month – was taking steps to work closely with organisations such as Nature Action 100 (NA100) and to learn from similar collaborative projects by investors.
“We’re very actively looking for close coordination and additionality with other existing initiatives through having participants of other initiatives on our advisory committee, as well as direct engagements with secretariates of other initiatives,” he said.
“We intend to contribute by driving on from the experience gained in the climate and human rights space on responsible political engagement, considering not only whether companies need to engage with policymakers, but how they do that in a responsible way and what indicators should be used to measure that.”
Spring will engage with investee firms on their policy advocacy practices and processes, initially focusing on deforestation and land degradation as a source of biodiversity loss. It is expected to announce around 80 target firms in Q1 2024, selected primarily on a geographic rather than sectoral basis.
Speaking earlier at the event, Alicia Kedzierski, Head of ESG and D&I at the UK’s Financial Conduct Authority, said effective action on nature risks required “collaborative effort” from market participants, policymakers and regulators.
“Start building up as well as out – build on top of each other’s initiatives. Where there are already great ideas and action plans in place – build on top of those,” she said.
Soft-launched at COP15 last December – to coincide with the signing of the Global Biodiversity Framework (GBF) – NA100 unveiled last month its focus list firms it will prioritise for engagement and benchmarking. The list is comprised of 100 companies spanning eight sectors regarded as having the largest nature footprint.
One of the initiative’s six ‘investor expectations’ covers investee firms’ engagement with external parties across the value chain, including trade associations and policymakers.
Emine Isciel, Head of Climate and Environment at Storebrand, and Board Member at NA100, said investors were already collaborating closely to optimise impact and resources.
“The companies that Spring will identify need to have much more in-depth dialogue on their behaviour regarding corporate political engagement. Alignment [between the initiatives] allows a unique opportunity for us to go further into this issue of political engagement. Our focus [at NA100] will be on negative impacts across their whole operations and throughout their value chains,” she said.
“When Spring was being developed, we were invited to the table quite early, to help ensure alignment and additionality,” added Isciel, who is also Co-chair of the Investor Policy Dialogue on Deforestation, which engages with governments on the supply and demand side of deforestation risks on behalf of institutional investors that hold sovereign bonds.
Greater scrutiny of lobbying
Climate-related stewardship activities by institutional investors have increasingly encompassed policy engagement in recent years, including greater scrutiny of investee firms’ direct and indirect lobbying activities, as well as more effort directed toward policy advocacy by investor networks to accelerate climate action by governments.
Asset owners and managers collaborated on the development of a voluntary standard for lobbying disclosures, which uses 14 indicators to help investors assess whether investee firms are taking responsibility for the impact of their advocacy on climate policies.
In extreme cases, attempts by investors and NGOs to file shareholder resolutions in pursuit of more information about firms’ climate-related lobbying activities have led to intimidation and litigation.
Steinweg and Isciel said that the nature-related engagement initiatives would learn from investors’ prior experience on engaging collaboratively in other sustainability-related topics, including Climate Action 100 (CA100) and the PRI’s Advance.
“Similar to CA100, we will develop a benchmark to help us track the progress of focus companies against our expectations,” said Isciel.
“It’s worth noting that the second phase of CA100 shifted from a focus on disclosure to implementation of transition plans. Long-term targets are very important, but we need to see action in the next two to three years, given the 2030 targets of the GBF.”
The resource challenges of managing and reporting ESG risks have been an increasing concern over the past 12 months, with asset owners and others looking to avoid duplication of effort and streamline practices.
Last December, the PRI and the Thinking Ahead Institute partnered on a project to establish the appropriate levels of resource needed for effective conduct of stewardship by institutional investors.
In July, the Church of England Pensions Board, which manages assets worth around £3.2 billion (US$3.9 billion), exited the Net Zero Asset Owner Alliance to concentrate its portfolio decarbonisation efforts through use of the Net Zero Investment Framework and membership of the steering committee of the Paris Aligned Asset Owners.
Last month, ESG Investor reported on efforts by to reduce the ESG-related reporting burdens on UK-based asset owners by both standards-setters and regulators.
The PRI’s Steinweg said Spring would maximise the investment community’s contribution to halting and reversing biodiversity loss in line with the GBF, addressing nature loss as a source of long-term financially material risk to signatories.
“We’re doing this through a collaborative stewardship initiative because the PRI’s experience shows it is an effective and efficient tool for these types of objectives,” he said.