Founding members of nature-focused investor collaboration hope engagement will achieve new insights and business model change.
Institutional investors said collaborative engagement was needed to extract decision-useful data on nature risks from corporates at the ‘soft launch’ of Nature Action 100 at COP15 yesterday.
“Engagement is a critical piece because data is so sparse,” said Peter van der Werf, Senior Manager of Engagement at Dutch asset manager Robeco, adding that the information derived from engagement activities would help investors allocate capital in ways that protect and restore nature.
Van der Werf acknowledged that portfolio managers do not currently have the information they need to understand the materiality of nature to long-term value creation and destruction.
“This is an under-appreciated element of engagement,” he said. “Companies must change, but investors must also change.”
The new group, which will launch officially next spring, is intended to be a focus for investor engagement with corporates and policymakers with the aim of allocating capital toward nature-positive investments and supporting the objectives of the Global Biodiversity Framework (GBF), currently being negotiated at COP15.
“Nature Action 100 will be the centre of gravity for investor action,” said Mindy Lubber, CEO of US-based investor network Ceres, also speaking at the launch event. Lubber pointed out the high degree of risk to investors from nature-related crises, given estimates that as much as half of global GDP is moderately or heavily reliant on ecosystem services.
“Timely and necessary actions”
Using a similar model to Climate Action 100+, an investor-led initiative which engages with large carbon-intensive firms, Nature Action 100 will identify and engage with companies “deemed to be systemically important to the goal of reversing nature and biodiversity loss by 2030” to ensure they are taking “timely and necessary actions to protect and restore nature and ecosystems”.
Nature Action 100 is currently focused on identifying the sectors and companies with the largest nature-related risks, impacts and dependences, and is expected to nominate member institutions to lead engagement efforts with senior executives at focus companies on behalf of the group.
As part of its engagement activities, Nature Action 100 said it will develop sector-specific pathways, identify corporate actions needed to protect and retore nature, track progress of focus companies against key indicators, and “support investor and corporate advocacy efforts”.
Last month, Nature Action 100 confirmed that investor networks Ceres and Institutional Investors Group on Climate Change would run its secretariat as well as its corporate engagement workstream. The group has also appointed a science council and a technical advisory group, to be jointly led by the Finance for Diversity Foundation and the think tank Planet Tracker.
The launch investors for Nature Action 100 were AXA Investment Managers, Columbia Threadneedle Investments, BNP Paribas Asset Management, Church Commissioners for England, Domini Impact Investments, Federated Hermes, Karner Blue Capital, Robeco, Storebrand Asset Management, Christian Brothers Investment Services, and Vancity Investment Management.
Almost 120 asset owners and managers have so far joined the initiative and speakers encouraged others to register their interest ahead of the formal launch.
Changing business models
Subject to negotiation at COP15, the GBF will include a requirement for large financial institutions and corporates to report on their nature-related risks. A framework to standardise reporting and governance of these risks is being developed by the Taskforce on Nature-related Financial Disclosures, but will need to be transcribed into law by major jurisdictions to have legal force.
Voluntary reporting standards for biodiversity disclosures already exist, including one currently being updated by the Global Reporting Initiative. But investors have little access at present to comparable and accurate data on nature-related risks compared to data on companies’ greenhouse gas emissions.
As well as emphasising their need for greater insights into firms’ biodiversity related risks, impacts and dependencies, founding members said Nature Action 100 would be seeking to accelerate change at portfolio companies.
Sonya Likhtman, Engagement and Stewardship Manager at Federated Hermes, said that investors would use the full range of engagement tools available, including voting and proposing resolutions at AGMs.
“To create change in the real economy, we really do need engagement with corporates,” she said. “We are sending a strong signal that now is the time to change business models.”
Mary Beth Gallagher, Director of Engagement at Domini Impact Investments, said supplier relations were a key element of companies’ exposure to biodiversity loss, but said that firms would also need to carefully consider their relationships with communities impacted by their operations. Firms may need to implement processes to ensure consent of communities or avoid displacement, she suggested.
“Not only is this agenda essential to meeting our objectives to some of our greatest systemic challenges, including climate change and deforestation, but it is also critical to respecting the rights of Indigenous Peoples and local communities and their role in maintaining and enhancing biological and cultural diversity,” she said.