Nature Action 100, a new investor-led engagement initiative focused on driving more ambition and action from companies to reduce nature and biodiversity loss, soft launched at the UN Biodiversity Conference yesterday.
Last month’s COP27 might have left some with more questions than answers but one thing was clear: nature and biodiversity are now a fundamental part of the responsible investing conversation.
Discussions continued at the UN Biodiversity Conference (COP15) in Montreal, Canada and it’s here that Stephanie Pfeifer, IIGCC CEO and Mindy Lubber, CEO and President of Ceres, along with research partners Finance for Biodiversity and Planet Tracker, and an initial group of investors, formally launched Nature Action 100.
IIGCC and Ceres are co-leaders of the initiative’s Secretariat and corporate engagement workstream, while Finance for Biodiversity and Planet Tracker will co-led the Technical Advisory Group.
“It is a topic that, from speaking to many of our members, we understand is rapidly rising up the agenda,” explained Stephanie during her opening remarks: “With half of global GDP – around $44 trillion – dependent on nature and its services.” (World Economic Forum)
This makes accounting for nature-related risks and opportunities, and being able to influence companies’ action in this area, a key part of an investor’s fiduciary responsibility to their clients and beneficiaries.
Dependency and impact
Studies show that the depletion of earth’s natural capital can very quickly create disruption for companies through additional operational costs or by threatening critical supply chains, as well as a larger impact on the economies in which they operate.
“HALF OF GLOBAL GDP IS DEPENDANT ON NATURE AND ITS SERVICES.”
This creates a risk of stranded assets on top of detrimental portfolio performance.
The Nature Action 100 release outlines that agricultural products are most dependant on natural resources; with apparel, accessories and luxury goods; brewers; electric utilities; and independent power producers and energy traders also heavily reliant.
In terms of impact on biodiversity, agricultural products are again the largest contributor, followed by distribution; mining; and oil and gas exploration, production, storage and transportation.
This means that corporations in the food system represent both the biggest risk and opportunity for investor engagement on nature. Among other elements, investors will scrutinise pesticide and water-use as well as the more sustainable production of products such as soy, palm oil and timber.
Though the theory of biodiversity and nature is less defined, in many ways it is a natural extension of responsible investing.
One example highlights that protecting and restoring forests and other natural ecosystems could provide up to 30% of the climate change mitigation needed to limit global temperature increases to between 1.5 and 2°C.
And when building resilience and adaptation to climate disasters, there are several examples where natural defences offer a better solution to man-made measures.
Some may be familiar with mangrove trees, which are a more cost-effective alternative to sea walls or dikes when it comes to coastal flooding, as well as offering greater benefits to local ecosystems.
So, while it may be daunting at first – without the established industry sector pathways now familiar in Climate Action 100+ engagement – the benefits of corporate action on nature are tangible.
PROTECTING AND RESTORING FORESTS AND OTHER NATURAL ECOSYSTEMS COULD PROVIDE UP TO 30% OF THE CLIMATE CHANGE MITIGATION NEEDED TO LIMIT GLOBAL TEMPERATURE INCREASES TO BETWEEN 1.5 AND 2°C.
Parallels and differences
Investor action on climate change is now widely accepted by governments, corporates and the industry but many will remember that this was not always the case.
Now, credible net zero commitments with clear transition plans, as well as building adaptation and resilience to physical climate risks, have become crucial components of protecting portfolios, with a greater benefit to the world at large..
With that cultural shift in mind, responsible investors face a new yet familiar challenge as they set out to do their part to halt and reverse nature’s decline through corporate engagement. And there are both parallels and differences between the fields of study.
Biodiversity and nature metrics are yet to be defined, along with clear sectoral and thematic pathways to success, but this was also true of the climate space. Those same models can prove useful here.
Furthermore, investors are already familiar with corporate engagements of this type and their work on climate has established a blueprint that can quickly be applied to the theme of nature.
“WE SEE THE OPPORTUNITY TO SUPPORT INVESTORS IN ACTIVELY ENGAGING WITH COMPANIES ON NATURE AND BIODIVERSITY AS COMPLEMENTARY TO – AND INDEED NECESSARY FOR – MUCH OF IIGCC’S EXISTING WORK ON CLIMATE,” SAID STEPHANIE PFEIFER.
Read more about investor action on climate change in our COP27 reflections: What happened? What didn’t happen? What next?
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