During UN Climate Week, Robeco is among those calling on investors to measure the impact of investments on biodiversity. Work is underway in the firm's home Dutch market on developing a framework, but there is worry that competing standards are already littering a financial landscape in much need of consolidation.
In a note this week, Dutch asset manager Robeco highlighted the work being done to devise metrics that measure investment impacts on biodiversity rather than climate risk more broadly. It is a salient point as Climate Week, happening virtually this year and arguably less effective for real diplomacy gains, braces for another round of pledging and foreboding at the annual UN General Assembly.
In the Netherlands, several investors led by ASN bank are collaborating in the Partnership for Biodiversity Accounting Financials (PBAF) to develop such metrics across all asset classes.
Land use change is one of the worst contributors to biodiversity loss, where much of the damage is caused by commodity crop production. As a result, the asset manager is ramping up engagement on deforestation linked to five high-risk commodity crops – cocoa, natural rubber, soy, beef, and tropical timber and pulp.
The first three engagements focus on environmental management aimed at ‘zero deforestation’, including providing biodiversity impact assessments, fauna and flora restoration and conservation plans, and what circular economy principles companies are using in their production.
The fourth addresses disclosures, certifications and traceability; and the fifth the social aspect of producing these commodities that tackle community, land rights and labour rights. The goal is to reach 100 per cent traceability for producers and users in these chains. "Only then will it be possible to trace the impact on biodiversity in the supply chain," Robeco said.
But being able to measure a company’s impact on biodiversity is not easy. A report last year by AXA Group and the World Wildlife Fund for Nature (WWF) concluded that impact metrics for biodiversity are much harder to calibrate than for carbon footprints, but said that tools are emerging to “help financial institutions map which sectors are particularly at risk - both on the impact and dependency sides."
One is the Global Biodiversity Score developed by the Paris-based financial institution CDC Biodiversité (Groupe Caisse des Dépots). Another is Encore, a tool designed for the finance sector by the Natural Capital Finance Alliance to understand exposure to natural capital risk better.
Encore's developers looked at 167 economic sectors, including the three most prone to economic disruption from natural depletion: agriculture, aquaculture and fisheries, and forest products.
Robeco is also urging other financial institutions to sign up to the Finance for Biodiversity Pledge that is launching at the UN gathering this Friday. Undeniable urgency is now being felt by investors to stop talking and start delivering. Some would argue that green finance is already suffering from pledge fatigue.
"By signing the pledge, institutions commit to collaborating and sharing knowledge, engaging with companies, assessing impact, setting targets and report publicly on progress," the firm said. Twenty-six institutions from 10 countries are on board so far, with two signatory CEOs slated to speak on the initiative at the vritual event. More information can be found here.