The report emphasises the urgent need for investors to incorporate biodiversity considerations into their investment strategies. It highlights the significant financial risks posed by biodiversity loss, such as physical risks from ecosystem degradation and transition risks from changing regulations and market expectations. Given that half of the world’s GDP depends on healthy ecosystems, investors are strongly urged to take action.

The case for investor action on biodiversity

Biodiversity loss is occurring on an unprecedented scale, with over 50% of global GDP relying on ecosystem services. This situation exposes all asset classes and sectors to financial risks. Physical risks include the degradation of protective coastal habitats, while transition risks arise from regulations like the EU’s Deforestation-Free Regulation. On the other hand, addressing biodiversity loss offers significant opportunities, including the potential to generate up to USD 10 trillion annually by 2030 and create 395 million jobs.

What to consider before writing a biodiversity policy

Investors should consider three crucial elements before developing a biodiversity policy: the organisational approach, understanding biodiversity, and determining the policy type. The report recommends a five-step approach:

1. Build an understanding: Establish a shared understanding of biodiversity within the organisation, including its relevance to investment practices. This involves conducting research, training staff, and engaging with peers.

2. Assess and prioritise risks and opportunities: Conduct a high-level portfolio assessment to identify areas with the greatest biodiversity impacts and dependencies. This includes considering the full value chain where possible.

3. Establish strategy and set targets: Define and publicly acknowledge biodiversity-related goals and targets. Align these with international standards and integrate biodiversity considerations into investment decision-making processes.

4. Manage risks and opportunities: Implement risk management strategies to address biodiversity-related risks and leverage opportunities. Engage with investees to improve their management and disclosure of biodiversity impacts.

5. Monitor and disclose: Establish a monitoring programme to track progress against biodiversity targets and regularly report to stakeholders, including clients and regulators.

Developing an organisational approach

The report advises following the five-step approach outlined above. It also stresses the importance of engaging with stakeholders, such as investees and local communities, to enhance the understanding of biodiversity impacts and ensure effective policy implementation.

What to include in a biodiversity policy

A comprehensive biodiversity policy should include:

• Aims, scope, and commitments: Define the organisation’s motives, objectives, and the sectors and asset classes covered. Address regulatory requirements and commitments to international frameworks like the Global Biodiversity Framework.
• Governance: Describe how the policy aligns with existing responsible investment policies. Outline roles and responsibilities for implementation and monitoring.
• Approach to biodiversity: Detail the methods for assessing biodiversity risks and opportunities, specifying whether in-house or external frameworks are used.
• Target setting and strategy: Set clear biodiversity targets and strategies, focusing on priority sectors and aligning with international frameworks. Quantitative targets could include the percentage of portfolio companies with biodiversity policies.
• Management of risks and opportunities: Explain how the organisation plans to address biodiversity loss and incorporate biodiversity considerations into investment decisions.