ShareAction: asset managers are blind to biodiversity loss crisis

16 Jun, 2020 01:13
source: Singularity Financial

Singularity Financial Hong Kong June 16, 2020 – Biodiversity loss is considered one of the greatest risks facing society today. The challenge is complex, and tackling it requires a broad collective commitment. But the financial sector has a key role to play. The influence it wields through the ownership and financing of companies means it potential for change should not be underestimated.

An overwhelming majority of the world’s largest asset managers, with assets under management equivalent to over half of the world’s total GDP, are failing to identify and manage the harmful impacts of investee company operations on natural habitats and ecosystems, finds a new report from the responsible investment organisation ShareAction.

“…human activities have already severely altered 75 per cent of terrestrial and 66 per cent of marine environments, threatening the survival of around 25 per cent of the assessed animal and plant species, with one million species facing extinction, many of them within decades. Nearly half of the world’s ecosystems have declined in size and condition against their estimated natural baselines and many continue to decline at the rate of at least four percent per decade.”

This is despite the fact that the loss of biodiversity is considered among the greatest risks facing society today, according to the World Economic Forum. The destruction of nature is not only affecting business bottom lines, but also bringing ecosystems closer to destabilising tipping points, which may have serious consequences for human health, global food security and the efforts to contain catastrophic climate change.

In its latest analysis published through two reports on asset managers’ approach to the dual challenge of biodiversity loss and climate change, ShareAction finds that:

1. None of the 75 of the world’s largest asset managers has a dedicated policy on biodiversity and only 11% of the surveyed managers state in their investment policies that they expect portfolio companies to mitigate the negative impacts of their operations on the natural environment. Often, biodiversity loss is included in generic ESG integration, with little consideration.

2. Only 11% of asset managers have policies requiring portfolio companies to mitigate harmful impacts on biodiversity.

3. 84% of world’s largest asset managers have no policies to exclude coal companies from their investment portfolios, 93% have no policies prohibiting investment in tar sands.

4. J.P. Morgan Asset Management, Goldman Sachs Asset Management and Nuveen, commit in their policies to generally voting against shareholder proposals requesting transparency around corporate lobbying on climate.

Krystyna Springer, an analyst at ShareAction and author of the report, says: “The current pandemic is a sharp reminder of the consequences that human encroachment on ecosystems can have for the global economy and human health. This is only the latest in a tide of disease outbreaks that have emerged over the last few decades, driven by land-use change and habitat depletion.

“Covid-19 has also shown that predicting the timing and the scale of shocks originating in the natural world is fraught with complexity, and cannot be managed through the lens of financial materiality and the traditional risk-return approach. Biodiversity loss is not a new, in-vogue ESG theme – it is closely intertwined with the climate crisis and threatens to compromise the efficacy of global climate action, and if economic actors don’t start tackling it in the next few years, the damage will irreversible.

“The window of opportunity is closing rapidly as we enter a critical decade. We need transparency and urgent and disciplined action by asset managers, asset owners, regulators and policymakers, for a fundamental shift towards a truly sustainable and resilient global financial system.”