Investors Encouraged to Better Preserve Protected Areas
Guidance highlights the vital role of biodiversity-rich zones as a conservation tool, warning against the risk of stranded assets.
Investors have been reminded of the critical part they can play in helping to halt and reverse biodiversity loss through strong policies, capital allocation and portfolio stewardship processes.
In new guidance addressed to asset managers and owners, NGO ShareAction and the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) made five key recommendations to improve risk management in protected areas.
“We know investors are not doing enough to adapt their policies to tackle the destruction of important ecosystems in protected areas,” said Alexandra Pinzon, Head of Biodiversity at ShareAction. “To address the global extinction crisis and unprecedented decline of nature, [they] must recognise [this] and strengthen their investment strategies and engagement with companies accordingly.”
The report places a particular focus on areas that have been designated as protected by governments due to their biodiversity-rich nature. This includes places such as the Central Amazon Conservation Complex – the largest protected area in Brazil’s Amazon Basin – and the River Dee in the UK.
It describes practical steps investors can take to incorporate protected areas into their environmental and social risk-management processes – including the establishment of clear expectations for investee companies and robust escalation strategies if they fall short of expectations.
“Asset managers and asset owners can drive positive impacts for nature through their investment decisions,” said Neville Ash, Director of UNEP-WCMC. “For example, when they engage with companies and exercise their voting rights, they can be influential in ensuring that businesses respect and help manage protected area networks.”
Ash welcomed the guidance, arguing it was a valuable step towards the “whole-of-society” action called by the Kunming-Montreal Global Biodiversity Framework (GBF), and ahead of COP16. Finalised during COP15, the GBF committed signatories to protecting 30% of land, marine and ocean resources by 2030, which would significantly increase the areas under mandatory protection – triggering further further restrictions on economic activity.
According to the report, biodiversity is currently being lost at an “unprecedented rate”, with species extinction estimated at 100 times that in pre-human times.
Protected areas have demonstrated impacts on the reduction of species extinction and threats to associated ecosystems, while area-based conservation has been recognised internationally and received regulatory support globally, ShareAction and UNEP-WCMC stressed.
“We need to see investors use the huge power they wield to reduce nature-related risks and impacts, especially on internationally recognised areas of importance for biodiversity conservation,” said Pinzon. “This would also be beneficial for them, as the regulatory shifts required to deliver the ambitions of the GBF have resulted in more stringent biodiversity protections and expanded protected areas – which could lead to stranded assets, reputational damage and other financial consequences.”
Moving the dial
Having monitored the responsible investment policies and performance of the world’s largest asset managers over the past few years, ShareAction said there remained significant room for improvement in the way investors prevent risk in protected areas and protect their financial returns.
The NGO’s latest benchmarking reports showed that 64 asset managers and 50 insurers lacked clear evidence of policies to manage risks associated to protected areas.
The five key recommendations included in the guidance aim to address these shortcomings. They include: mitigating biodiversity impacts across portfolios; setting ambitious targets to ensure assets are engaged in activities that align with protected areas’ management plan or designation; defining expectations for investee companies to assess, disclose and manage their direct and indirect areas of influence; ensuring they monitor whether assets intersect with lands managed by Indigenous Peoples or local communities; and having robust escalation strategies that cover biodiversity engagement priorities.
“This publication by UNEP-WCMC and ShareAction provides concrete guidance on how investors can mitigate the risks of investing in and around protected areas, and how those can be incorporated into investment policies,” said Robert-Alexandre Poujade, ESG Analyst and Biodiversity Lead at BNP Paribas Asset Management (BNPP AM). “We explicitly recognise the threat that investment decisions may pose to protected areas, and believe that effectively considering [this] in our policies has strengthened our risk management.”
This approach is reflected in BNPP AM’s Responsible Business Conduct policy – which forms one of the six pillars of its Global Sustainability Strategy – and in its Biodiversity Roadmap, Poujade explained.
“Projects and companies need to comply with sector-specific criteria related to protected areas,” he added. “Examples include our agriculture policy that focuses specifically on companies in the beef or soy value chain operating in the Amazon and Cerrado regions, and our oil and gas policy – which includes requirements for those operating in the Arctic and Amazon regions.”
In addition, BNPP AM’s palm oil and wood pulp policies include criteria for companies to avoid converting protected areas – such as UNESCO World Heritage Sites, wetlands on the Ramsar List, or Alliance for Zero Extinction sites – into industrial plantations.
For project-level analysis including mining, infrastructure and real estate, the asset manager has embedded a protected-area screen using the Integrated Biodiversity Assessment Tool (IBAT), while its corporate-level analysis relies on a combination of data partners – including the World Wide Fund for Nature Biodiversity Risk Filter and Morningstar Sustainalytics .
“We have an ongoing discussion with data providers to leverage on the latest investor-friendly data solutions,” said Poujade. “Since location and supply-chain data are usually only partially available, we are aware that we need to progress in our understanding of potential exposure to protected areas. For this reason, we continue to conduct research on the subject – including on the conversion of natural ecosystems and on seafood.”
A recent paper published by New Forests highlighted growing investor commitments to align with net zero and nature-positive goals, driven by the Paris Agreement and the GBF. The Australian asset manager also said threats to biodiversity and nature loss from climate change presented “major opportunities” in sustainable land-based investments.
Improving the track record
Beyond investor action, ShareAction and UNEP-WCMC indicated that their broader goal is to shift corporate behaviour as it relates to ESG and biodiversity matters.
“‘Over 85% of the world’s largest companies have a significant dependency on nature across their direct operations, and nearly half have at least one asset located in areas scientifically designated as important from a biodiversity perspective,” said Steven Bullock, Global Head of Research and Methodology at S&P Global Sustainable1. “We’re seeing growing interest from companies in understanding where their assets are located, and how they could be impacted by nature dependency and transition risks.’
Describing the ramp-up of commitments to more transparency on nature-related impacts and dependencies – largely due to the uptake of Taskforce on Nature-related Financial Disclosures recommendations – as a “very positive step forward”, Bullock said he looked forward to continuing these discussions at the upcoming COPs.
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