Nature stewardship initiative to prioritise deforestation and land degradation as key sources of biodiversity loss.
The Principles for Responsible Investment’s (PRI) new stewardship initiative on nature, Spring, will focus on the responsible political engagement practices of investee firms to support coordinated policy action that protects nature and portfolios.
The PRI announced the new initiative, which aligns with the goals and targets of the Global Biodiversity Framework (GBF), during a climate and nature plenary session at its PRI in Person 2023 conference in Tokyo.
Initially focusing on investee companies’ policies and practices around deforestation and land degradation as a source of biodiversity loss, the scope of the initiative is expected to expand to other drivers of biodiversity loss over time.
The PRI said the initiative will target “real-world outcomes in key geographies that face high risks” of future forest loss and land degradation by focusing on “systemic policy alignment” with the GBF, which aims to halt and reverse biodiversity loss by 2030.
According to the PRI, focusing investor efforts on policy “will make it more likely that systemic risks are addressed across economic sectors and at an appropriate pace”.
“The initiative is going to be focusing around companies’ political engagement and lobbying and how to ensure that’s in line with investors’ expectations on having a healthy ecosystems and safe climate. Responsible political engagement is absolutely critical,” said Tamsin Ballard, Chief Investor Initiatives and Collaboration Officer at the PRI, speaking at the event.
In an accompanying investor statement, the PRI said multiple interventions were needed to “successfully decouple” economic activity from deforestation, conversion and associated human rights abuses, including the responsible production and sourcing of forest-risk commodities, and the adoption and implementation of supportive public policies.
“Spring intends to engage companies that have an influential voice in shaping public policies relating to deforestation dynamics, either through their direct political engagement or indirectly through their membership in or association with trade associations, think tanks and similar bodies,” it said.
The PRI is inviting signatories to endorse its investor statement, which emphasises the need for “urgent action” by investors and outlines high-level expectations of companies for their business operations, supply chain management, and their responsible political engagement practices.
The statement calls on investee firms to “align direct and indirect political engagement activities” with the goals of the GBF and Paris Agreement.
Firms must also establish and disclose “robust” governance processes and board oversight to ensure alignment of all direct and indirect political engagement, and disclose affiliations to trade associations, think tanks and similar bodies across all geographies. They should also monitor the policy positions of such affiliates and address any misalignments.
In addition to committing to the goals of the GBF, expectations of companies include setting “ambitious time-bound and science-based targets”, with interim milestones, towards eliminating deforestation and biodiversity loss across their operations and value chains.
According to the investor statement, firms should also monitor, disclose and mitigate nature-related dependencies, impacts, risks and opportunities in alignment with disclosure frameworks such as the Taskforce on Nature-related Financial Disclosures. It also recommends the adoption of sustainable practices for land-based operations to reduce land degradation while increasing biodiversity and soil health, in line with the UN’s Land Degradation Neutrality Principles.
Suite of options for investors
PRI signatories must sign up to the statement by 19 January 2024 to be included in the first set of publicly announced endorsers in early 2024.
In parallel, the PRI expects to release a focus company list and begin recruiting participants, which will carry out day-to-day engagement activities with the selected companies.
To compile its focus company list, the PRI will identify priority geographies for deforestation and land degradation, determine policy areas with most impact in priority geographies and then identify strongest corporate influence in the selected policy areas.
The PRI added that endorsers of the statement would retain “complete discretion” over whether and how to support any given engagement activity. It added that its expectations are aligned with those of other collaborative engagement initiatives, such as NatureAction 100 (NA100), the Investor Policy Dialogue on Deforestation and Finance Sector Deforestation Action.
Ballard said the investor statement would lay the groundwork for investors to tackle the risks entailed by nature and biodiversity loss through stewardship.
“The initiative’s focus on real-world outcomes and emphasis on responsible political engagement are consistent with PRI’s own existing workstreams and will compliment and bolster the efforts of other existing initiatives already active in the space,” she said.
“We’re keenly aware of the need to provide a suite of options to allow investors access to the best collaborative tools to fit their needs, while also avoiding duplication.”
The investor statement recognised the dependencies and impacts of the investment value chain on biodiversity and impact services and endorsed collaborative investor action as a means of clarifying expectations of companies and other stakeholders. “We support ambitious collaborative stewardship activities that target positive change,” it said.
“Climate risk and nature risk are financial risks and both must be considered by investors. By utilising the benefits of collaborative action and marshalling their stewardship activity to address these risks, in keeping with their fiduciary duties, investors will be best placed to deliver long-term, risk-adjusted returns well into the future,” said Ballard.
In June, the PRI established a signatory advisory group and technical advisory group to provide strategic input and support initiative development. Iy also appointed Tim Steinweg as its first head of nature stewardship.
Last week, NA100 confirmed the beginning of its engagement phase by sending letters to 100 target firms.