Incorporating nature as a consideration in investment decision-making requires focussing on step-by-step actions and investing in opportunities rather than managing aggregated metrics, according to the Accounting for Sustainability (A4S) Asset Owners Network.
In a guide written for pension fund chairs and trustees, the Network said that as an industry, investors had grown to expect that robust data would drive investment decisions but that even as reporting improves, for example with the help of the Taskforce on Nature-related Financial Disclosures (TNFD), nature-related metrics are unlikely to aggregate into a simple portfolio dashboard.
“For many years yet, investors will have to think differently about how best to manage nature-related risks and invest in nature-related opportunities,” representatives of the Network wrote.
Drawing on examples of European asset owner action, the guide sets out some top tips for peers around the world, saying that “the most important thing is to start now”.
Russell Picot, chair of the HSBC Bank (UK) Pension Scheme and chair of the A4S Asset Owners Network, said there were many barriers to effective action, such as data, but “while we may not have all the answers, the urgency of our planet’s needs demands urgent action”.
“We need to be bold in how we re-examine traditional approaches to investment decision making and not unduly constrained by the availability of only limited amounts of data before we take action,” he said.
The advice in the A4S guidance includes that asset owners identify their training needs and surround themselves with experts, which may require challenging advisers.
Trustees should also get started by beginning with one or two priority areas, as “the specific risk you choose to focus on initially is less important than making a start in the first place”.
Another recommendation is for asset owners to make nature a stewardship priority, leveraging climate and other engagement efforts. Stewardship should not only be about engaging with companies but also engaging with policymakers, regulators and standard-setters.
Last month 190 investors kicked off the Nature Action 100 initiative by writing to companies to press them on their management of biodiversity and natural resources.
The Principles for Responsible Investment is separately convening investors for a new collaborative stewardship initiative on nature.
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