Biodiversity-oriented engagement: Scope and approaches

The report highlights the urgency to reverse biodiversity loss, noting that over $44 trillion of global economic value—more than half of global GDP—depends on biodiversity and ecosystem services. The primary drivers of biodiversity loss are land/sea use change, overexploitation, pollution, climate change, and invasive species. Financial institutions play a pivotal role in raising awareness and influencing best practices among investees.

Investors are encouraged to adopt a systematic engagement framework by addressing:

• Why: Define engagement focus areas, such as specific biomes, geographic regions, or biodiversity challenges.
• What: Develop strategies to mitigate negative impacts, manage dependencies, and drive systemic change across sectors and value chains.
• How: Select issuers, establish metrics, and tailor engagement requests based on financial exposure and issuer maturity.

Key sectors include agriculture, forestry, fashion, food production, infrastructure, and energy. To drive systemic change, downstream sectors like consumer goods and retail are prioritised to influence broader value chains.

Guidelines for biodiversity engagement

Structured engagement consists of three main steps:

• Determine objectives, targets, and indicators:
  • Align objectives with the issuer’s biodiversity maturity. Examples include integrating biodiversity into governance, mitigating risks, and promoting net-positive outcomes.
  • Financial institutions are encouraged to adopt frameworks like TNFD reporting and SBTN guidelines for risk assessment.
• Plan engagement and track progress:
  • Tools such as ENCORE help measure biodiversity impacts and dependencies. Engagement timelines typically span 24–36 months, with progress tracked using robust templates and KPIs.
• Validate results:
  • Success is determined by improvements tied to set targets, but challenges like data scarcity and potential double-counting of outcomes are acknowledged.

Prominent tools, such as satellite monitoring (e.g., ACTIAM’s project with Satelligence) and biodiversity measurement models like Mean Species Abundance, were highlighted for transparency and monitoring.

Biodiversity engagement collaborations

Collaborative initiatives play a critical role in driving systemic change. Key efforts include:

• PRI, FAIRR, and ACTIAM’s Satellite Monitoring: These collaborations address deforestation, water risks, and biodiversity loss across supply chains.
• Nature Action 100: Aimed at engaging the 100 companies with the most significant biodiversity impacts.

Despite progress, gaps remain in addressing biodiversity risks in underrepresented sectors, such as fashion, infrastructure, and marine ecosystems. For example, the freshwater realm and smaller agricultural commodities (e.g., cacao, coffee) lack sufficient collaborative focus. The report recommends expanding efforts to fill these gaps.

Integration of biodiversity in financial practices

Financial institutions are urged to incorporate biodiversity into investment frameworks. Recommendations include:

• Aligning biodiversity metrics with financial KPIs and integrating biodiversity considerations into executive remuneration.
• Leveraging regulatory frameworks like the EU’s Sustainable Finance Disclosure Regulation (SFDR), which mandates biodiversity risk disclosures.

From engagement to voting

Voting is a complementary tool to hold companies accountable for biodiversity practices. Key strategies include:

• Integrating biodiversity in voting policies: Examples include Aviva Investors’ policy to vote against companies with poor biodiversity practices and AXA IM’s deforestation engagement framework.
• Pre- and post-voting feedback: Engaging with companies before and after voting to align on biodiversity-related objectives.
• Escalation through shareholder proposals: Filing resolutions on biodiversity-related risks, governance, and disclosures. Initiatives like “say-on-nature” proposals could become more widespread.

Recommendations for next steps

The report provides detailed recommendations for financial institutions, including:

• Developing science-based biodiversity targets and robust metrics.
• Expanding collaborative initiatives like Nature Action 100 to cover underrepresented sectors and ecosystems.
• Creating sector-specific pathways for biodiversity-positive transformations.
• Enhancing transparency through better disclosure frameworks and dashboards.

Financial institutions are also encouraged to link biodiversity with climate efforts and engage with data providers to improve biodiversity measurement tools. Regulatory and policy engagement is recommended to support enabling conditions for companies.

Conclusion

Biodiversity engagement is essential for financial institutions to mitigate risks and promote positive environmental outcomes. With tools like ENCORE, satellite monitoring, and collaborative initiatives, financial professionals are well-equipped to address biodiversity challenges. The guide provides a structured framework for impactful engagement, collaboration, and active ownership, urging financial actors to prioritise biodiversity in their strategies to ensure a resilient, sustainable future.