Introduction

The report explores how asset owners are integrating nature and biodiversity into investment decision-making beyond climate-focused approaches. Based on interviews with 20 asset owners and asset managers across the UK, Europe, Asia, Oceania, North America and South America, it assesses governance, risk management, reporting practices and delegation to managers amid rising biodiversity loss, ecosystem degradation and regulatory pressure.

Literature review

Most organisations remain at an early stage of addressing nature-related risks. Regulatory momentum is increasing following the launch of the Taskforce on Nature-related Financial Disclosures (TNFD) in 2023, which builds on the Taskforce on Climate-related Financial Disclosures (TCFD) structure. TNFD promotes a phased approach across governance, strategy, risk and impact management, and metrics and targets. Evidence cited suggests 63% of financial institutions plan to start TNFD reporting by 2025. Tools such as the TNFD LEAP framework and ENCORE are identified as practical resources for assessing dependencies, impacts, risks and opportunities.

Nature & biodiversity within sustainability priorities

Sixty-five per cent of interviewees already integrate nature and biodiversity into their sustainability strategies, usually within the environmental pillar alongside climate. A further 20% are in the process of integration, while 15% address nature opportunistically within broader ESG strategies. Integration has largely occurred within the past five years. Financial materiality is the main driver for 75% of interviewees, reflecting concerns over supply-chain disruption, water scarcity, deforestation and ecosystem degradation. Anticipated regulation, particularly the possible mandatory adoption of TNFD, is a secondary driver. Asset owners increasingly view nature and climate as interconnected, with emerging consideration of social issues such as indigenous rights and community wellbeing.

Governance structures and resource capacity for nature and biodiversity

Most interviewees do not have governance structures dedicated solely to nature and biodiversity. Instead, these topics are typically addressed through existing ESG or climate governance frameworks. A minority have established biodiversity working groups or are using TNFD to identify governance gaps. Internal expertise varies widely. Some organisations are expanding teams and investing in training, while others rely on a small number of specialists. All interviewees reported reliance on external expertise, including NGOs, academic institutions and data providers, due to the complexity and location-specific nature of biodiversity risks.

Dependencies, impacts, risks and opportunities

Asset owners recognise nature-related risks as potentially material but are at differing stages of assessment. Water, agriculture and food systems, deforestation, mining and microplastic pollution were the most frequently cited risk areas. Many funds use ENCORE to map sectoral dependencies and impacts. While some distinguish between impact materiality and financial materiality, these are generally viewed as inseparable. Nature-based solutions, including sustainable forestry and water management, are seen as long-term opportunities. However, interviewees highlighted limited liquidity, data quality and return predictability compared with climate-focused investments.

Reporting plans and data

Most interviewees have not yet started formal nature-related reporting. Among those that have, disclosures typically begin with qualitative sections in responsible investment, stewardship or sustainability reports rather than full TNFD alignment. Only a small number, mainly outside the UK, have adopted TNFD guidance. Key barriers include limited data availability, lack of standardised metrics and resource constraints. Several asset owners plan to integrate nature into existing TCFD reports and adopt a phased approach by asset class, prioritising listed equities and credit where data is more accessible.

Best practice

Best practice is characterised by incremental progress aligned with TNFD recommendations. This includes educating decision-makers, mapping dependencies and impacts, leveraging existing climate and ESG work, and securing board-level understanding of financial materiality. Case studies indicate that starting with available data and gradually improving governance and disclosure is more effective than delaying action.

Conclusion

Asset owners increasingly recognise nature and biodiversity as financially material, systemic risks. While current practices remain underdeveloped, momentum is building through regulatory expectations, emerging frameworks and analytical tools. Integration is expected to progress gradually through existing governance, risk management and reporting structures.