LIBF_logo.svg
close.svg
Share page
Share on LinkedinShare on TwitterShare on Facebook
LIBF logo
open.svg
back_to_top_arrow.svgright_arrow.svgleft_arrow.svg
Access the FW archive here
Follow us
Data protection
© The London Institute of Banking & Finance 2023 - All rights reserved
Biodiversity: the global biodiversity framework
Actions are greener than words
Chris Newlands talks to asset managers who have signed the Finance for Biodiversity Pledge about their goals and what changes they are making to achieve them
Newlands_global_biodiversity.jpg
It makes for grim reading. The planet is said to be approaching the point of no return. Depending on your sources, we are losing species faster than ever before, plastic pollution in our oceans could triple by 2040, and two-thirds of the world’s population may face water shortages by 2025.
Alexander Burr, Environmental, Social and Corporate Governance (ESG) Policy Lead at Legal & General Investment Management, one of Europe’s largest asset managers, puts it simply: “If we do not reverse nature loss, we will pass a tipping point from which we cannot recover.”
To emphasise his point, Burr adds that global wildlife populations have slumped by more than two thirds since 1970, while two fifths of the world’s plants are now threatened with extinction. “The natural world is in crisis,” he says.
He and L&G are not alone in their thinking, with a growing number of investment heavyweights adding their names to an industry pledge to make a “positive contribution to biodiversity through their activities and investments”.
The pledge, part of becoming a member of the Finance for Biodiversity Foundation, was first signed by 26 investors in September 2020 but now has 140 signatories, with Stichting Pensioenfonds ABP, Phoenix Group and Swiss Life Asset Managers France among the latest to sign up.
It was this group that took particular notice when a landmark UN agreement was signed at the end of last year to, among other things, protect a third of the planet’s lands and seas by 2030. The agreement replaced the Aichi Biodiversity Targets set in 2010 where just 17% and 10% of the world’s terrestrial and marine areas, respectively, were under protection.
Dubbed a ‘Paris Agreement for nature’, a hat tip to the 2015 global climate accord, and called the Kunming-Montreal Global Biodiversity Framework, the deal consisted of four main goals and 23 action-oriented targets that came after two weeks of intense negotiations at the UN Biodiversity Conference COP15 in Montreal, Canada. The agreement also included a commitment to deploy a minimum of $200bn per year by 2030 in financial flows from the public and private sector to try to close the biodiversity finance gap of $700bn per year.
On paper, the agreement looked impressive, but it has been criticised for being woolly and containing watered-down ambitions. It is also not legally binding.
Critics have been asking whether the deal, like the pledges made by the 140 big investors, has created a way for companies to ‘greenwash’ their businesses and claim they are working hard when it comes to biodiversity without actually doing much. It is an accusation that has been levelled at the investment management community before.
On paper, the agreement looks impressive, but it has been criticised for being woolly and watered down
In the UK, the Financial Conduct Authority (FCA) has vowed to crack down on the growing number of investment products being wrongly marketed as ‘green’ or falsely making wider sustainability claims. “Consumers must be confident when products claim to be sustainable that they actually are. Our proposed rules will help consumers and firms build trust in this sector,” said Sacha Sadan, director of ESG at the FCA, at the end of last year when new regulations were first mooted to try to correct wrongdoing in this area.
The greenwashing topic also hit the headlines over the summer when Greta Thunberg pulled out of appearing at the Edinburgh International Book Festival after accusing the lead sponsor, Baillie Gifford, of greenwashing. The climate activist had been scheduled to speak at the annual festival in August but said she would no longer attend because the Scottish asset manager was “heavily” invested in fossil fuels.
Nick Thomas, a partner at the firm, responded by saying that only 2% of client money was invested in companies with activities related to fossil fuels, “compared to a market average of 11%”.
But damage had been done. So what do some of the signatories of the Finance for Biodiversity Pledge have to say about their motivations for signing up and about the concerns swirling around the industry regarding greenwashing?
Fiona Melrose, Head of Group Strategy and ESG at UniCredit, the first bank from Italy to become a signatory, says: “Our membership of the Finance for Biodiversity Foundation represents part of a proactive, collaborative approach that fosters accountability for all. No single organisation can hope to make a dent in an issue as big as biodiversity if it works alone. We also have a robust set of internal rules to prevent greenwashing and we are working to include biodiversity considerations as part of these.”
Sarah Woodfield, Active Ownership Manager at Schroders, the large UK asset management company, adds: “Our decision to join initiatives like the Global Biodiversity Framework reflects the work we are doing, rather than [being something] to replace that effort.”
And Fredric Nyström, Head of Governance and Sustainability at AP3, the Swedish pension fund, says:: “We believe schemes like this, where investors come together with high ambitions for knowledge-sharing and a shared agenda, have a great opportunity of creating actual change. Our ambition is to fulfil the requirements as a signatory of the pledge and we have no reason to believe other signatories have a different agenda.”
The suspicion is that solving the biodiversity crisis is low down on the list of priorities for most large investors

But what have these companies been doing in relation to biodiversity?

Schroders joined Finance for Biodiversity in July 2022 after announcing a partnership with non-profit organisation Conservation International to create Akaria Natural Capital, the first natural capital impact investment manager in Singapore.
It says the foundation’s main draw is the ability to collaborate. Woodfield says: “Finance for Biodiversity provides a much needed space for institutional investors to come together, share best practice and use their collective voice to advocate for progress on addressing nature loss as an investment risk.”
Ann Meoni, senior sustainability analyst at Abrdn, a global investment company, adds: “This is an area of fast-moving change and, therefore, learning from others and inputting our own progress is a benefit to all.”
Nyström agrees. “We strongly believe in investor collaborations,” he says, adding that sharing knowledge will have a “much greater impact” when it comes to solving the biodiversity problem.
Specifically, he says AP3 has begun to analyse the nature-related impact of its equity portfolio in order to identify companies and sectors ripe for engagement. “We are working on a biodiversity action plan with targets and key performance indicators that will guide our efforts to manage risk and bring about change regarding biodiversity,” he adds.
As with the climate transition, “protecting biodiversity requires strong collaboration between financial and non-financial institutions to achieve tangible results”, says Melrose. “Membership has given us access to a deeper pool of information – including scientific reports and frameworks, as well as guides and academic papers – which has raised our awareness as a bank and informed our own approach.”
As part of its membership, UniCredit says it will provide an initial disclosure on the full level of action it will take by 2025.
Again, on paper, this all sounds impressive but critics will want to hear more about the specific details and intended changes. More than 20 signatories of the Finance for Biodiversity pledge were contacted for this article but only five were prepared to provide answers on what changes they were making to their operations, which perhaps tells its own story.
The suspicion is that solving the biodiversity crisis is low down on the list of priorities for the majority of investors despite very public gestures attempting to show otherwise.
Chris Newlands
Chris Newlands is a writer and editor and was formerly business and money editor at The i Newspaper. He was also previously an editor and correspondent at the Financial Times, and has written for the BBC, The Wall Street Journal, The Guardian, and South China Morning Post. He is the author of the Virgin Money Maker, a personal finance guide