Ilmarinen, the Finnish pension insurer, has set its goals for the next two years and a roadmap to combat loss of biodiversity and natural capital in the long term.
The latest initiative mirror’s Ilmarinen’s roadmap to climate change which it launched a couple of years ago.
“Biodiversity and nature loss must be taken into account in investment activities in the same way as climate change. Until now, economic growth has been done at the expense of natural capital. In investment terms, we can no longer afford to eat capital, but have to start living on interest,” said Karoliina Lindroos, Ilmarinen’s head of responsible investing.
A quarter of Ilmarinen’s direct listed investments are heavily dependent on biodiversity while a third of the companies in the investment portfolio strongly affect biodiversity.
“Investors play an important role in safeguarding natural diversity. We need to identify and prevent both biodiversity-related risks to investments and harms to biodiversity caused by our investments. In addition, investment targets that help maintain and improve natural diversity must be identified,” she said.
Ilmarinen already takes into account the diversity of nature in its operations and strives to continuously improve its methods. Ilmarinen’s goal for 2023 is to enhance risk-based due diligence in identified sectors heavily dependent on biodiversity, starting with the materials sector and improving its own reporting.
For 2024, setting additional requirements in areas that have significant impacts on biodiversity, for example the use of certification systems as well as adopt impact strategies aimed at biodiversity.
Lindroos explained how Ilmarinen’s roadmap will improve biodiversity by firstly identifying what investors can do, secondly evaluating its portfolio composition, thirdly taking biodiversity into account in investment decision and lastly improving reporting.
“First, we found out what all international investors can do to consider and promote biodiversity, and what kinds of biodiversity-related initiatives and cooperation opportunities exist for investors. Although the topic is complicated for investors and the practices are still developing, we identified several existing ways to take biodiversity into account in investment activities,” she said.
“We analysed our investment portfolio of listed shares in order to identify which types of investments are most significant for biodiversity. According to the assessment, the material sector, i.e. the raw material industry, has the greatest risk and effects. In the future, we will also compare the results with a suitable benchmark and develop new investment and portfolio management methods,” she explained.
In addition, based on the portfolio analysis, Ilmarinen plans actions that help combat the loss of nature.
“For example, we can influence our investment targets, so that they evaluate and report on their effects and support meaningful nature-positive presentations at general meetings. We can also follow enhanced due diligence, create investment selection criteria aimed at biodiversity, or, for example, exclude activities that are particularly harmful to biodiversity,” Lindroos said.
Furthermore as potential assessment and reporting standards for investors are developing rapidly Ilmarinen strives to report its progress according to the best standards in the industry.
“To begin with, we report on the dependencies and impacts of our portfolio related to biodiversity and natural capital. In the future, one possibility is, for example, to use the Taskforce on Nature-related Financial Disclosures framework in the same way as we use the Taskforce on Climate-Related Financial Disclosures reporting framework that takes climate change into account,” she concluded.