Asset management biodiversity policies 'critically undeveloped'
Less systematically addressed than climate change
The asset management industry is failing to identify and manage the impact of investee companies on biodiversity, according to the latest analysis from ShareAction.
The report found that not one of the 75 asset managers, with assets under management equivalent to over half the total global GDP, has a dedicated policy on biodiversity risks and impacts covering all portfolios.
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A majority of firms (68%) had no public investment policy which references biodiversity, although 11% have published responsible investment or engagement policies adopting a clear stance regarding biodiversity and outlining "general expectations" for investee companies.
Meanwhile 21% reference the issue in some way, but without communicating a clearly defined position.
Over half (56%) of the fund houses surveyed provide some detail on material biodiversity-related risks identified in relation to portfolios, with legal and regulatory risks cited most often (29%).
Reputational concerns rank second on the list of most commonly identified risks, with 27% of those surveyed citing it, while operational risk comes in a close third at 24%.
Fewer asset managers identify biodiversity investment opportunities than risks (51%), but those opportunities are spread across a wider field of ideas.
Circular economy solutions and sustainable agriculture are the most commonly identified opportunities (15%), while consumer demand for sustainable food, sustainable forest management and green finance each feature in 12% of responses.
In regards to the sectors in which managers view biodiversity as a material risk, agriculture (41%) and forestry (35%) top the table, while oil and gas (29%) and real estate (25%) were also cited by over a quarter of respondents.
Tourism, fashion, transportation and pharmaceuticals were deemed to be at less material risks, with fewer than 10% of those surveyed referencing any of these sectors.
Less than half (49%) of asset managers discuss biodiversity in their engagement with companies on their corporate strategy and of those that do, deforestation is far and away the most common theme (27%).
No other theme manages to break the 10% mark from those surveyed, with fresh water (7%), overfishing (5%) and World Heritage Sites protection (3%) among the remaining issues discussed.
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Voting received even less attention from the fund houses analysed, with only 36% of managers stating their voting policy covers biodiversity and only 7% demonstrated a commitment to increased transparency regarding the wider environmental impact of company operations in their public voting policies.
The use of biodiversity-related metrics is "in its infancy", according to the report, and 65% of those who integrated biodiversity risks into investment decisions utilised ESG scores to do so.
A further 44% integrated these risks through negative screening, while 33% used positive screening, 32% pointed to best-in-class approaches and 11% utilised benchmarks or indices.
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