07 Dec 2022 3 min read

COP15: how LGIM is tackling biodiversity loss

By Alexander Burr , Toby MacKean , Catherine Ogden

Having discussed what changes we'll be pushing for at the COP15 biodiversity conference in Montreal, we lay out what we're already doing as asset managers to tackle the nature loss crisis.

tiger-eye.jpg

We believe the interdependencies between nature and climate are of critical importance. A changing climate threatens natural ecosystems, and nature loss amplifies climate change by reducing the ability of ecosystems to store carbon.

Tackling biodiversity and nature loss is, we believe, an essential part of achieving net-zero emissions. As a recent UN report highlighted, the private sector will play an important role over the coming years, providing they “combine ‘net zero’ with ‘nature positive’”1.

Having discussed the changes we’re pushing for at COP15 in a previous blog, let’s examine what we’re already doing to tackle nature loss.

What is LGIM doing?

In November 2021, we committed to the Finance for Biodiversity Pledge and launched our biodiversity policy, which includes detail on how we are seeking to address risks related to biodiversity loss and deforestation.

We are working to act on these in several ways:  

  • Enriching the data used to inform our analysis
  • Integrating our findings into investment tools and processes
  • Exploring opportunities in nature-based solutions
  • Expanding our engagement with companies, policymakers, regulators and broader market participants
  • Integrating biodiversity into our climate expectations by expanding our Climate Impact Pledge

As part of our deforestation commitment, we have taken further steps to assess our exposure to commodity-driven deforestation risk. This an important part of making progress towards our climate and biodiversity goals, and in our recently published deforestation policy, we set out both our aims and actions, and also our expectations of companies regarding deforestation.

As well as engaging with policymakers and regulators, LGIM is also participating in the Investor Policy Dialogue on Deforestation in producing countries, including Brazil and Indonesia, and co-chairing the consumer countries and regions workstream, such as the UK, US and EU.  

Data: what gets measured gets managed

We are integrating biodiversity metrics into LGIM’s ESG tools, including our ESG Score. There are well-known challenges when it comes to biodiversity data – it is complex and location-specific. There are some very detailed and established data sets that enable the measurement of biodiversity in different ways. The issue is the geospatial overlay of company operations and supply chains with these to measure impacts and dependencies quantifiably and systematically. It is likely to evolve rapidly, and we will work through these complexities as the area matures.

Additionally, reflecting our support for strengthening disclosure and management, we’ve integrated an expectation for companies and sectors within our Climate Impact Pledge to assess their impact and dependencies on biodiversity and nature.

We are an active forum member of the Taskforce on Nature-related Financial Disclosures (TNFD), providing our investor perspective on how it evolves as a framework. Much like the TCFD is doing for climate, we need it to structure how companies approach nature-related risks and opportunities, assess those over different forward-looking scenarios and quantify the related financial impacts.

While metrics related to deforestation are increasingly available, we recognise that more needs to be done to improve the standardisation and increase the scope and coverage of this data. That is why, in collaboration with other Finance Sector Deforestation Action (FSDA) signatories,2 we have written to data providers to engage and work with them on further developing of their offerings.

What happens next?

Nature is critical to the global economy: an estimated $44 trillion of economic value generation – more than half of the world’s total GDP – is moderately or highly dependent on nature3. The World Bank estimates that a partial ecosystem collapse could cost 2.3% of global GDP (or $2.7 trillion) per year4.

As a result, we believe investors and the companies in which they invest should take steps to integrate nature considerations into climate commitments, strategies and transition plans. We will continue to collaborate and share knowledge to develop our expectations of companies in this regard.

Through our continued engagement with international organisations, policymakers, regulators, peers and the companies we invest in, we aim to use our scale and influence to encourage as many stakeholders and organisations as possible to take action to protect nature and biodiversity.

There are signs of progress, but we can’t afford the same length of time it has taken to scale up action on climate. We must act quickly; Montreal is the time for a ‘Paris moment for nature’.

 

1. https://www.unep.org/news-and-stories/press-release/doubling-finance-flows-nature-based-solutions-2025-deal-global 

2. Leading financial institutions commit to actively tackle deforestation  - Climate Champions (unfccc.int)

3. https://www3.weforum.org/docs/WEF_New_Nature_Economy_Report_2020.pdf

4. https://www.worldwildlife.org/press-releases/68-average-decline-in-species-population-sizes-since-1970-says-new-wwf-report

Alexander Burr

ESG Policy Lead

Alexander joined in 2019 and leads LGIM’s ESG policy engagement across markets. Prior to this, he helped establish an impact fund that uses blended finance to invest in emerging markets. Before that, Alexander negotiated blended finance investments at the European Bank for Reconstruction and Development (EBRD) to support sustainable economic growth across Eastern Europe, Central Asia, and North Africa. He has held roles advising governments on alternative finance and established a nuclear safeguards organisation. Alexander holds a BSc in Politics and International Relations from the University of Southampton, and further education at LSE, ICSA, CISL, and Birkbeck.

Alexander Burr

Toby MacKean

ESG Analyst

Toby is an ESG Analyst within our Investment Stewardship team.

Toby MacKean

Catherine Ogden

Manager - Sustainability & Responsible Investment

Catherine joined LGIM in 2015 to help drive forward ESG integration into mainstream fund research and to strengthen sustainability engagements. Prior to this, Catherine spent four years working with governments in Africa and Asia on the sustainable policy, planning and management of the extractives sector, and five years in sell-side equity research. A keen linguist and sportsperson, she bemuses her colleagues with a love of Capoeira and British Military Fitness.

Catherine Ogden