Finance & Investment

Report Gives Investors Practical Steps to Strengthen Nature Conservation Portfolios

ShareAction’s report highlights the critical role investors play in helping reverse biodiversity loss, and highlights specific approaches needed when investing in or near areas that have been protected by governments due to their rich biodiversity.

Published 3 months ago | About a 4 minute read

Image: Eutah Mizushima

This week, responsible investment charity ShareAction and the UN Environment Program World Conservation Monitoring Center (UNEP-WCMC), launched a new report setting out how investors should strengthen their approach to protect some of the world’s most important biodiversity-rich areas. The guidance highlights the critical role investors must play to help halt and reverse biodiversity loss through their investment policies, capital allocation and portfolio stewardship processes.

Since COP15 in 2022, we’ve seen an explosion of corporate and government strategies aimed at progressing toward the Summit’s goal of halting and reversing global nature loss by 2030. Companies and cities are looking to science-based targets for nature, initiatives such as the Nature Positive Initiative and Business for Nature, and investor tools such as WWF’s Biodiversity Risk Filter for guidance; and mechanisms including biodiversity credit markets and the Taskforce on Nature Markets have emerged to help accurately price and value nature in global markets.

But over the last few years, ShareAction 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 and safeguarding against key social and environmental risks — including policies to protect vital biodiversity.

ShareAction’s latest benchmarking reports have shown significant room for improvement in the way asset managers and insurers protect against risk towards protected areas as well as their own financial returns. 64 asset managers and 50 insurers assessed by ShareAction lack clear evidence of policies to manage risks associated to protected areas. The report’s guidance builds on that of wider biodiversity strategies, including the Taskforce on Nature-related Financial Disclosures and the Global Reporting Initiative.

“We know investors are not doing enough to adapt their investment policies to tackle the destruction of important ecosystems in protected areas,” said Alexandra Pinzon, Head of Biodiversity at ShareAction. “To address the global extinction crisis and unprecedented decline of nature, investors must recognize the vital role of protected areas as a tool for biodiversity conservation and strengthen their investment policies and engagement with companies accordingly.

“We need to see investors use the huge power they wield to reduce their nature-related risks and impacts, especially on internationally recognized areas of importance for biodiversity conservation. This would also be beneficial for investors, as the regulatory shifts required to deliver the ambitions of the [COP15] 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.”

ShareAction’s new report focuses on specific approaches needed when investing in or near areas that have been designated as protected by governments — such as the Central Amazon Conservation Complex and the UK’s River Dee — due to their rich biodiversity. 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 robust escalation strategies where expectations have not been met.

Key recommendations for investors include:

Assess and mitigate biodiversity impacts across portfolios but recognize 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.
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.
Define expectations for companies to assess, disclose and manage their direct and indirect area of influence — which could extend well outside their physical footprint.
Ensure that investee companies have assessed whether assets intersect with lands managed by Indigenous Peoples or local communities and have adequately followed Free, Prior and Informed Consent processes.
Have a robust escalation strategy that covers biodiversity engagement priorities. Escalation policies should also consider the possibility of divestment if biodiversity risks are not addressed.

“Asset managers and asset owners can drive positive impacts for nature through their investment decisions,” said UNEP-WCMC Director Neville Ash. “For example, when they engage with companies and exercise their voting rights, they can be influential in ensuring that businesses respect and help manage protected area networks. I therefore welcome this guidance, which clearly lays out the steps investors should take to reduce their risk associated with protected areas and drive positive change. As we move towards COP16, this is a valuable step toward the whole-of-society action that the Kunming-Montreal Global Biodiversity Framework calls for.”