Responsible investor group launches new initiative to drive corporate engagement on biodiversity loss « Carbon Pulse

A New Initiative on Nature Stewardship to Drive Corporate Engagement on Biodiversity Loss

A new initiative on nature stewardship will initially focus on forests and land degradation and aims to ramp up pressure on companies to disclose nature-related risks and engage politically.

The Principles for Responsible Investment

The Principles for Responsible Investment (PRI) launched the “stewardship initiative on nature” on Wednesday, which aims to drive investor pressure on companies to address biodiversity loss. PRI has more than 3,500 signatories to its overarching six principles to boost Environmental, Social, and Governance (ESG) considerations in investment decisions and is backed by two UN groups, the UNEP Finance Initiative and the UN Global Compact.

“We recognize the role that we as investors can play to halt and reverse forest loss and land degradation, as a key driver of biodiversity loss, including through investor stewardship,” the group said in a statement.

Focus Areas and Objectives

PRI’s new initiative will focus on forest loss and land degradation in the first instance. Other thematic areas, such as oceans and freshwater, will be scoped in 2023, the group said.

“Universal owners and long-term investors have a limited ability to diversify their portfolios away from the impacts of such issues. Stewardship activities, particularly when carried out in collaboration with other investors, are an essential tool for managing risk, as well as driving more sustainable real-world outcomes,” the group added.

Types of Investor Signatories

PRI distinguished between two types of investor signatories for the new initiative in a statement: “participants” and “endorsers”. Participants are the more active of the two and will shape an investor working group to carry out day-to-day engagement activities with selected focus companies.

Company Selection Process

Companies will be selected through a three-part process, the group said:

1. Identify priority geographies where deforestation is taking place;
2. Determine which policy arenas are impacting deforestation rates in priority geographies (policy arenas could be domestic, but also located in consuming countries or part of international processes);
3. Identifying the strongest corporate influence in selected policy arenas.

Expected Company Actions

Under the initiative, companies are expected to conduct a series of nature-related actions across their business operations, supply chain management, and political engagement. PRI said company prioritization is currently underway, and more information is expected in early 2024.

Endorsers and Support

Endorsers to the initiative are signatories to the statement and support the objectives, but “have complete discretion” over whether and how to support engagement activities within their investment portfolio. The initiative is now gathering endorsers, which can include asset owners, investment managers, and financial service providers.

Alignment with Existing Frameworks

Many of the company expectations relate directly to processes outlined by the Taskforce on Nature-related Disclosures (TNFD) and Science-Based Targets initiative (SBTi), including disclosing nature-related risks and dependencies as well as setting time-bound targets to eliminate deforestation within their operations.

However, PRI’s initiative goes beyond the recently published frameworks and requires a level of political engagement from target companies, who will be expected to disclose affiliations to trade associations and think tanks. Companies will be expected to assess those organizations for alignment with the mission and “consider corrective action” where misalignment occurs.

Collaboration with Nature Action 100

PRI also said it is working closely with Nature Action 100, an investor engagement initiative that announced its initial company list in September. PRI advised corporates with the capacity to join both initiatives. There is a degree of cross-over, with both initiatives expecting investors to encourage corporate nature-related disclosures and science-based target setting, as well as taking governance and operation measures to limit their impact on nature loss.

By Tom Woolnough – tom@carbon-pulse.com

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