Spring into Action

Tim Steinweg, Head of Stewardship – Nature at Principles for Responsible Investment, outlines why systemic policy alignment with the Global Biodiversity Framework is vital to halt nature loss.

Japan is famed for its love of nature. The appreciation of nature, known as ‘shizen’ or ‘自然’ in Japanese, is deeply ingrained in the country’s culture. The annual cherry blossom season, or ‘sakura’, gathers people in parks and gardens to enjoy the fleeting beauty of spring, symbolic of the transience and preciousness of life.

It is, therefore, a fitting location for the launch of the UN-convened Principles for Responsible Investment’s (PRI) new stewardship initiative on nature – Spring – which will focus on the responsible 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), 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. 

According to Tim Steinweg, Head of Stewardship – Nature at the PRI, the rationale for the initial focus of the initiative is because “deforestation is the key driver of biodiversity loss and there is no credible pathway to limiting global warming without a full, immediate halt to deforestation”.

Interconnected issues

Research published in the journal One Earth found that some 1.6 billion of the Earth’s rural inhabitants (those living in areas with fewer than 1,500 people per square kilometre) live within five kilometres of a forest.

“Forest are home to millions of people,” Steinweg told ESG Investor. “There’s a social element to protecting the forest that makes this such an interesting topic, at least for me personally.”

In September, experts backed the United Nations Development Programme’s (UNDP) call to recognise the interconnectedness of environmental and social-related issues in tackling climate change. 

A recent report by the UNDP remarked that the evolution of the global financial system has created “vast imbalances” that now “pose risks” to markets and economies, and that solely using sustainable finance strategies to address climate change will be “inadequate” if interrelated social issues are not addressed simultaneously. 

“Environmental and social are not siloed; they are interconnected,” says Steinweg, adding that the whole concept and discussion around a just transition encapsulates this point.

There is also a strong and growing awareness of the link between climate and nature, prominently featured at the recent PRI in Person conference.

“This awareness highlights that the protection of the natural world can be one of the key contributors to mitigating climate change,” he says.

However, at the same time, there is also recognition that there are potential climate solutions that could have an adverse impact on nature. Large-scale cultivation of energy crops, such as corn or sugarcane for biofuels or wood for biomass energy, can lead to deforestation and habitat destruction, causing harm to local ecosystems and biodiversity.

“All these things are interrelated,” he says. “When you talk about forests, that’s where it all comes together, because it’s ultimately about land use and rights, and how we manage it all.

“Deforestation is therefore a particularly well-suited sub theme to integrate all these different elements.”

Systemic alignment

The PRI said the Spring 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. 

“Ultimately, when you look at the drivers of deforestation you find that they are systemic in nature,” Steinweg says, adding that they tend to result from an “interplay” between global economics, trade, social dynamics and political choices.

“It’s only natural to conclude that systemic solutions are necessary,” he says, with these systemic solutions lying in public policy and supportive measures toward the objectives of the GBF.

The Taskforce for Nature-related Financial Disclosures (TNFD) recently published its final recommendations for nature-related risk management and disclosure, serving as a tool to “operationalise” the achievement of Target 15 of the GBF.

Widespread satisfaction with Target 15’s calls for policy measures to encourage the monitoring and disclosure of nature risks in order to “progressively reduce negative impacts” was offset by a wish for greater specificity, now left up to individual countries.

Steinweg admits that while its commendable to witness individual companies achieving deforestation-free supply chains or individual investors building deforestation-free investment portfolios, it’s essential to understand that these individual efforts alone won’t be sufficient to halt deforestation. 

To make a real impact, he says that more robust public policies are needed, adding that the recognition of the systemic nature of the issues and solutions forms the foundation of the Spring initiative.

Speaking at the launch of the Spring initiative in Tokyo, Tamsin Ballard, Chief Investor Initiatives and Collaboration Officer at the PRI, said: “The initiative is going to be focusing on 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.”

Steinweg explains how companies play different roles in society through their business operations, the products they market, the capital investments they make, and the way they design and manage their supply chains. A further role comes by engaging with policymakers.

“This recognition marks the starting point of our focus on responsible political engagement as one of the key aspects of our initiative,” he says, adding that for the PRI, responsible political engagement means being “transparent, consistent, and constructive”. 

To operationalise this, the PRI will ask companies to take several steps, such as calling on them to make a public commitment to align their political engagement practices with the overarching objectives of the GBF, implement these commitments consistently across different geographies and ensuring they do not lobby for conflicting positions in various jurisdictions.

Further, companies should disclose and be transparent about their political engagement practices, whether done directly or through business associations, think tanks, or other indirect channels. They must also be ready to take corrective action when their policy positions contradict their public commitments or the objectives of internationally agreed frameworks.

Tools for nature

To monitor the alignment between companies’ political engagement activities and the goals of the GBF, the PRI is developing a company assessment framework.

While the specific indicators are not yet finalised, Steinweg told ESG Investor that the PRI aims to leverage the work of other organisations, such as the World Benchmarking Alliance’s (WBA) Nature Benchmark.

WBA’s update benchmark analysed 350 global agri-food companies, including Bayer, Unilever and Walmart, ranking them on how they are managing their impact on nature and the environment, improving the healthiness of their food products, and providing decent working conditions. According to the analysis, the agri-food industry is falling short on sustainable farming and ensuring access to healthy food, partly due to a lack of understanding of nature impacts and dependencies. 

“There are various nature-related assessment frameworks, benchmarks, ratings, and trackers available, representing substantial efforts in this area,” says Steinweg, adding that the Spring initiative does not wish to duplicate these efforts but rather utilise the data and knowledge provided by these organisations.

“The PRI is highly supportive of other stewardship initiatives; we see them as different pieces of the puzzle, all working toward the same objectives,” he says, noting that the PRI encourages investors to join multiple initiatives.

“Our aim is not to compete for investor interest,” he explains. “We designed Spring to provide an additional and complementary approach.”

At the same time, Steinweg says that the initiative wants to avoid duplicative efforts that could create confusion.

The Spring initiative’s primary focus, he says, is on capturing real actions and results. 

“When assessing companies within the scope of our initiative, our aim is to go beyond merely evaluating their commitments and public statements,” he says, noting that the initiative will also examine the actual actions taken by these companies, whether in the realm of their political engagement practices, target settings, or how they report on interim milestones. 

“We will look for signs of progress and effectiveness,” he says.  “Ultimately, we hope this assessment process will help us track progress and evaluate the effectiveness of our own work, as our primary goal is to see tangible advancements in the areas we’re focused on.” 

Nature in focus

In September, the global investor initiative Nature Action 100 (NA100) entered its engagement phase, sending letters to focus list companies calling for “urgent and necessary action” to protect and restore nature and to mitigate financial risks. 

NA100 has named the 100 companies – which collectively have a market capitalisation of more than US$9 trillion – it will prioritise in key sectors to tackle the major drivers of nature loss caused by corporates. The focus sectors include biotechnology and pharmaceuticals, chemicals, food, forestry and paper, and metals and mining.

Similarly, the Spring initiative is in the process of compiling its own focus list of companies. Steinweg tells ESG Investor that the PRI is applying a geographical rather than sectorial lens.

“When you talk about nature loss more broadly, and deforestation specifically, it’s a dynamic process that plays out differently across different jurisdictions, making it very location-specific,” he says, adding that the initiative has a geographical starting point for its company selection rather than a sectoral one.  

“This doesn’t mean that we’re looking at companies all headquartered in a particular geography, but it means that we’re looking to capture those companies that have an influence, either directly or indirectly, on land use dynamics in key geographies,” he says. 

The Spring initiative has selected priority geographies over the summer through internal research, based on deforestation rates, current dynamics, past data, and specifically tried to capture some of the imminent future risks for the standing forests.

“We also ensured that we selected geographies where investors ultimately have some sort of exposure,” he says, noting that this is the first step in a three-step approach.

The second step, he says, is to identify the key policy arenas that shape land use dynamics in key geographies, including policy processes within those countries such as land conservation, land rights for indigenous communities, and production terms related to forest risk commodities.

This also includes international policy arenas as they relate to the drivers of deforestation and the demand dynamics of forest risk commodities. 

“After identifying these policy arenas, we want to identify which companies are actively involved in them, where influential corporate voices exist – these are the companies that we want to include in the scope of our initiative.” 

Steinweg tells ESG Investor that the Spring initiative is hoping to release its focus list of companies, along with the methodological justification, in Q1 2024, followed by the other components of the assessment framework. 

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