Responsible investment campaigner Share Action and the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) have launched a guide on how investors can strengthen their approach to protect some of the world’s most important biodiversity-rich areas.
The guidance identifies the critical role investors need to play to help stop, and even reverse, biodiversity loss through their investment policies, capital allocation and portfolio stewardship processes – and amounts to something of a call to action for institutional investors on biodiversity.
It focuses on the particular approach needed when investing in or near areas that have been designated as protected by governments, due to their rich biodiversity.
These include areas such as the Central Amazon Conservation Complex and the River Dee in the UK.
It describes practical steps investors should take to incorporate protected areas into their environmental and social risk management processes, establish clear expectations for investee companies and follow escalation strategies where expectations have not been met.
Key recommendations for investors include assessing and mitigating biodiversity impacts across portfolios, but also recognising the additional importance of protected areas.
Investors should also assess if any assets or sites within their portfolios intersect with, or are adjacent to, protected areas.
Share Action and UNEP-WCMC say investors should therefore “set ambitious targets” to ensure that all assets within protected areas are only engaged in activities that align with the management plan or designation of the respective protected area.
Escalation and engagement
Investors should also have an escalation strategy that covers biodiversity engagement priorities. Escalation policies should also consider the “possibility of divestment” if biodiversity risks are not addressed, noted the guidance.
Alexandra Pinzon, head of biodiversity at Share Action, said: “We know investors are not doing enough to adapt their investment policies to tackle the destruction of important ecosystems in protected areas.”
And she added: “To address the global extinction crisis and unprecedented decline of nature, investors must recognise the vital role of protected areas as a tool for biodiversity conservation and strengthen their investment policies and engagement with companies accordingly.”
A number of reports and supranational bodies have warned of the dangers of not addressing biodiversity risks.
For example, a study by the United Nations Environment Programme: State of Finance for Nature 2023, estimates that around 37% of species will be threatened or extinct by 2100.
And the loss of biodiversity is listed in the top five global risks in terms of impact to the global and financial system by the World Economic Forum, a Geneva-based think tank.
Research from S&P Global Sustainable has also shown “that about 70% of companies in the S&P Global 1200 have at least one asset in a protected area”, further highlighting that investors need to look at their investment policies, capital allocation and portfolio stewardship processes in addressing biodiversity.
“We need to see investors use the huge power they wield to reduce their nature-related risks and impacts, especially on internationally recognised areas of importance for biodiversity conservation,” Pinzon added.
This, she said, would also be beneficial for investors, as the regulatory shifts required to deliver the ambitions of the Global Biodiversity Framework result in more stringent biodiversity protections and the expansion of protected areas, which could lead to stranded assets, reputational damage and other financial consequences.
Room for improvement
Over the last few years, Share Action has monitored the responsible investment policies and performance of the world’s largest asset managers, assessing the ambition and transparency of their approaches to responsible investment, including policies to protect vital biodiversity.
The campaigner’s latest benchmarking reports have shown room for improvement in the way asset managers and insurers protect against risk towards protected areas as well as their own financial returns.
They revealed that 64 asset managers and 50 insurers assessed by Share Action lack clear evidence of policies to manage risks associated to protected areas.
UNEP-WCMC is a global centre focused on addressing biodiversity and nature’s contribution to society and the economy and operates as a collaboration between the United Nations Environment Programme and the UK conservation charity WCMC.
Neville Ash, director of UNEP-WCMC, said: “Asset managers and asset owners can drive positive impacts for nature through their investment decisions. For example, when they engage with companies and exercise their voting rights, they can be influential in ensuring that businesses respect and help man- age protected area networks.”
He therefore said the guidance helps to lay out the steps investors should take to reduce their risk associated with protected areas and drive positive change.
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