Dutch manager publishes biodiversity roadmap, plans to develop to “innovative” investment strategies.
Netherlands-based asset manager Robeco has unveiled a blueprint for integrating biodiversity more fully into its investment decisions, in partnership with World Wildlife Fund for Nature Netherlands (WWF-NL).
In creating an internal biodiversity roadmap, Robeco has taken “a real step forward” in understanding the impact of nature on financial performance and of the longer-term financial risks and opportunities, said Aaron Vermeulen, Director Green Finance, at WWF-NL.
The Dutch asset manager’s roadmap is set out in a white paper, which also describes the partnership between the two organisations. Robeco said the challenges posed by biodiversity loss are “so complex that no single investor can do this on their own”. The two organisations will co-develop a biodiversity investment framework and encourage financial sector stakeholders to integrate biodiversity into asset management.
The framework will drive product development opportunities across multiple asset classes, said Peter van der Werf, Senior Manager, Engagement, Robeco. “Our investment framework will be proprietary IP comparable to our SDG framework, which we developed in 2017. The biodiversity investment framework will form the basis to develop innovative investment strategies on biodiversity, while we also aim to work with WWF to inspire asset owners and asset managers to incorporate findings from our research in their investment policy.”
He added that the financial sector and the asset management industry have a crucial role to play in helping to prevent further biodiversity loss. While Robeco has been addressing biodiversity through activities such as its palm oil policy, there is “much more that we need to do, both in terms of further engagement and in embedding this factor systematically in our investment decisions”, said van der Werf.
The dependency of the global economy on nature and biodiversity is ultimately a financial risk, says Robeco. The white paper cites research by the De Nederlandsche Bank and the national Environmental Assessment Agency that estimated Dutch financial institutions have €510 billion of exposure to companies either highly or very highly dependent on one or more ecosystem services. The exposure to physical risk is equivalent to 36% of their portfolios, with €28 billion of assets dependent on pollination alone.
In 2021, Robeco conducted a heatmap assessment to understand the exposure of its investments to biodiversity risks. The assessment found that about one quarter of its AUM are either highly or very highly dependent on at least one ecosystem service. The highest exposures with impacts and/or dependencies were found in the pharmaceuticals, integrated telecommunication services, specialty chemicals, packaged foods and meats and apparel, accessories and luxury goods industries.
In 2022, Robeco plans to increase the granularity of its assessment to better understand and compare the biodiversity performance of individual companies within high-risk sub-industries. It expects that specific exposure of individual issuers to biodiversity risks and impacts will become an integral part of its investment processes.
Robeco aims to publish a biodiversity policy before 2023, prioritising areas of action in line with the findings of these biodiversity materiality assessments. The policy will inform portfolio construction processes for relevant investment strategies and will shape its target-setting strategy, which will aim to reduce the negative impacts of portfolios on biodiversity. Robeco also hopes to measure biodiversity risk at the issuer level in due course.