Nature-Positive by 2030: Asset Owners’ Role in Biodiversity Conservation
With the increasing awareness of nature-related risks in both the regulatory and investment sectors, asset owners are beginning to recognize the importance of allocating capital towards nature solutions. The urgency to address biodiversity loss and degradation is echoing the same alarm bells as those for climate change. A report by the World Economic Forum revealed that a significant portion of the global economy is reliant on nature, highlighting the interconnectedness between ecosystem health and economic stability.
The Kunming-Montreal Biodiversity Agreement, often likened to the Paris Agreement for its ambitious goals, has set a clear path towards halting and reversing biodiversity loss by 2030 and achieving full recovery by 2050. Central to this agreement is the “30 by 30” target, which emphasizes the protection and conservation of at least 30% of the world’s land, inland waters, coastal areas, and oceans by the end of this decade. This aggressive target underscores the critical need for immediate action to safeguard our natural resources.
The interconnection between climate change and biodiversity loss is increasingly recognized, with both exacerbating each other’s impacts. For instance, deforestation not only contributes to biodiversity loss but also worsens climate change. As the world grapples with these intertwined challenges, it is imperative for asset owners to align their investment strategies with nature conservation efforts.
While many asset owners have committed to achieving net zero emissions by 2050 in line with the Paris Agreement, the focus on setting similar targets for nature conservation has been relatively limited. Jane Wadia, head of sustainability at AXA IM, noted that asset owners are not yet establishing explicit nature targets at the portfolio level like they do for climate-related goals. However, there is a growing trend of dedicating a portion of portfolios towards biodiversity and nature capital investments.
One example of this shift is the Dutch pension fund ABP, which has pledged to invest at least €1 billion in biodiversity-related initiatives by 2030 as part of a broader impact investment strategy. Similarly, AXA Group has committed €1.5 billion to protect and sustainably manage forest ecosystems, aiming to mitigate up to 25 million tons of carbon dioxide annually. Additionally, AXA Group has allocated over €500 million towards biodiversity equity portfolios, reflecting a heightened interest in investments that contribute to natural capital.
Catalina Jugravescu, director at Pollination, highlighted the growing appetite among asset owners for investments that offer long-term cash flow profiles and inflation-linked returns, particularly in timberland and farmland sectors. This shift towards nature-positive investments signifies a broader recognition of the financial risks and opportunities associated with nature conservation.
Despite the momentum towards nature-positive investing, asset owners face challenges in setting explicit targets due to the lack of standardized metrics and data for biodiversity conservation. Reporting on progress towards nature goals is complex and multifaceted, making it difficult to quantify and track outcomes effectively. Nevertheless, asset owners are exploring avenues to incorporate nature considerations into their investment strategies through capital allocation commitments and engagement initiatives.
In alignment with the Climate Action 100+ model, the Nature 100 initiative aims to mobilize investors to engage with companies that have a significant impact on nature conservation. By encouraging companies to adopt strategies for biodiversity preservation and sustainable land use, this collaborative effort seeks to drive positive change at the corporate level. Additionally, the Taskforce for Nature-related Financial Disclosures plays a crucial role in enhancing transparency and accountability in nature-related investments.
The Science-Based Targets Network (SBTN) represents a pivotal platform for setting science-based targets for nature, akin to the SBTi’s role in climate action. Through a year-long corporate pilot program, SBTN has engaged global companies in setting targets for environmental impact reduction, with a focus on freshwater and land conservation. The integration of biodiversity considerations into target-setting processes underscores the importance of addressing nature-related challenges holistically.
Erin Billman, executive director of SBTN, emphasized the value of nature targets in driving meaningful change within corporate value chains. While nature targets may be complex and ambitious, they offer a pathway towards sustainable practices and enhanced environmental stewardship. As companies navigate the transition towards nature-positive strategies, the SBTN framework provides a roadmap for setting clear, measurable, and actionable targets.
As asset owners and managers navigate the evolving landscape of nature-positive investing, frameworks like SBTN, Nature Action 100, TNFD, and IPDD offer valuable resources for engaging with nature-related investments. By embracing a bottom-up approach to nature stewardship and incorporating biodiversity considerations into investment strategies, asset owners can play a pivotal role in driving positive outcomes for both the environment and financial sustainability.