Role of investors in biodiversity crisis

Anna Triponel

January 20, 2023
Our key takeaway: We are in a biodiversity crisis. A recent figure: around 1 million species are at risk of extinction. Companies are contributing to this biodiversity loss (e.g., land- and sea-use change, production of harmful pollutants, etc.). What are investors in these companies doing about it? The World Benchmarking Alliance calls on all investors to get moving on their journey towards nature positive future, and this starts by meaningful engagement with companies. Five actions: look beyond climate goals, take direct action to halt biodiversity loss, increase transparency on biodiversity hotspots and endangered species, respect the rights of Indigenous Peoples and Local Communities; and last but not least, cultivate responsible lobbying on nature.

The World Benchmarking Alliance (WBA) published ‘Nature Benchmark 2022: Investor guidance” (2023):

  • Why investors are being called to be stewards of nature and biodiversity: The report claims that around 1 million species are currently at risk of extinction, and that companies are contributing to this biodiversity loss through activities that range “[f]rom driving land- and sea-use change to the production of harmful pollutants.” While this biodiversity crisis really matters for the wellbeing of people, companies and other species, it should also matter to investors since our whole economy depends on nature. According to the WBA, “there is a systemic risk to financial markets if this is not urgently and adequately addressed, with over half of the world’s GDP, or $44 trillion, being dependent on nature.” Additionally, recent regulatory and international developments like the deforestation regulation from the European Union — mandating strict due diligence for the import of key commodities and related products — and the development of the Post-2020 Global Biodiversity Framework dictate the need for further engagement of both investors and companies alike in the protection of nature and biodiversity. 
  • 5 key issues for investors: WBA recommends that investors engage with companies on five key fronts: (1) looking beyond climate goals; (2) taking direct action to halt biodiversity loss; (3) increasing transparency on biodiversity hotspots and endangered species; (4) respecting the rights of Indigenous Peoples and Local Communities; and (5) cultivating responsible lobbying on nature. In sum, becoming nature-positive is a journey that investors can encourage companies to follow. As a first step, companies should start understanding how their value chain and business model interact with nature, and could start carrying out science-based assessments of their impacts of nature. Additionally, companies should commit to avoiding ecosystem conversion (i.e., by reducing deforestation), and reducing air and water pollution and plastic waste. They should also be encouraged to increase their transparency by disclosing the location of their operational sites and track the conservation status of surrounding nature; as well as to commit clearly to respect indigenous people’s rights and to obtaining Free, Prior and Informed Consent (FPIC) before they carry out projects. Finally, companies should advocate for more nature-positive policies and actions from industry associations.
  • Further evidence to inform engagement: the Nature Benchmark: While knowing what issues to engage on is key, WBA also suggests that investors use company-based evidence to support and inform that engagement. This evidence can be found in the 2022 Nature Benchmark, in which WBA assessed close to 400 companies across 8 industries on “the extent to which companies are reducing their negative impacts on nature, and contributing to the protection and restoration of ecosystems, aligned with the goals of the draft Global Biodiversity Framework.” In its 2022 edition, WBA identified that 97% of companies “have yet to commit to a nature-positive trajectory by 2030”, but also gained evidence-based insights into where companies stand and where they could go. The benchmark rates companies on the areas of Governance and Strategy, Ecosystems and Biodiversity, and Social Inclusion and Community Impact, and will be conducted again in 2023, when WBA aspires to include around 600 additional companies.

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