We expect companies to develop a comprehensive biodiversity strategy

AXA IM may look to vote against boards not showing progress

For investors, it is becoming increasingly important to consider how biodiversity might impact long-term portfolio sustainability – namely in the form of business and market disruptions, potentially lower returns, and reputational and regulatory risks. Prioritising biodiversity-friendly investments could possibly be key to managing these risks and contributing to positive social and environmental outcomes.

In many ways, the Global Biodiversity Framework, adopted at COP15 last year, provides an additional impetus by directly involving the private sector through specific targets, as well as calling for the full integration of biodiversity across all sectors. Ultimately, this should help with the alignment and scaling up of all financial flows and bring about greater monitoring and disclosure.

However, these practices are all still nascent and we have to manage our expectations constructively when it comes to engaging with companies on this challenge. Most are only just beginning to grapple with it and growing the internal skills and knowledge needed to address biodiversity properly.

Some reach out to external consultants, while others draw on insights from their own historical activities in the field of environmental protection. Each of them is still structuring their respective biodiversity actions and we expect important developments in the field during 2023, particularly driven by the future publication of the Taskforce on Nature-related Financial Disclosures framework and the first Science Based Targets Network standards.

As investors, we can play a key role in helping companies along this journey through engagement, sharing industry best practice, and helping establish action plans to address biodiversity loss.

Biodiversity roadmap

In 2022, we extended our engagement initiatives, from deforestation to address biodiversity more broadly, based on the integration of biodiversity-specific data and metric – biodiversity footprint by Iceberg Datalab. This new innovative data help us select and prioritise sectors and companies that present a significant biodiversity footprint and to focus our engagement efforts accordingly.

For example, when companies come to beginning their own journey and building action plans to address biodiversity, initial stepping-stones could include:

  • encouraging awareness and action for nature protection
  • setting and pursuing specific objectives to mitigate biodiversity loss
  • creating and detailing a set biodiversity policy
  • examining how biodiversity is being integrated into broader net-zero decarbonisation plans
  • detailing a zero-deforestation and supply chain traceability strategy  
  • improving disclosure around certified materials as well as use of recycled materials

These objectives reflect the stage that most companies are at on their journey to addressing or even comprehending biodiversity loss.

Of course, there is no ‘one-size-fits all’ approach in these areas, and what is appropriate in each instance can depend on a wide variety of factors including the maturity of the company’s sustainability strategy. This maturity can vary greatly from one company or sector to another.

At this stage, what we would expect to see is the development of a comprehensive biodiversity strategy and control around the potential risks associated with biodiversity loss, ultimately supporting a ‘nature-positive’ transformation of these companies.

So far, responses have been positive. We have found most companies are open to discussion and willing to make progress on identifying and managing relevant biodiversity risks and opportunities, despite the complexity of the biodiversity challenge. Achieving effective change can take time, and we define the timeframes that we consider reasonable to achieve these objectives, depending on the nature of the change we are targeting and the underlying concerns.

As this progress continues to escalate, we may look to expand our own actions, for example voting against board-related resolutions or supporting biodiversity-related ones at the general meetings of the companies we engage with, particularly when we see insufficient progress on our requests.

See also: – Less than half of asset managers voting on biodiversity

Fundamentally, there is an excellent opportunity here to encourage robust and timely actions to address this global challenge, and for dialogue between investors and investee companies to drive collective progress on these issues by leveraging standards developed by the industry and policymakers to support this dialogue.