Biodiversity is in crisis and Australia is at the forefront, having experienced a larger loss of biodiversity than any other continent over the past two centuries. Without biodiversity, the global economy would simply not operate as we know it. Nature provides us with services critical to sectors such as food, housing, and medicine among other daily necessities. Until recently this issue has been vastly overshadowed by climate change, but the reality is that the two issues are inextricably linked, and that biodiversity needs to be the next frontier when considering investment risk.
At Martin Currie Australia, we believe that we have a responsibility to ensure that companies we invest in on behalf of our clients are considering the potential impact of biodiversity on their business. In much the same way as we approached our work on Modern Slavery in 2021, we have undertaken a focussed project on biodiversity. This included writing to the management of the top 200 ASX companies, asking a set of detailed questions regarding the management of biodiversity risks across their day-to-day operations and strategic planning. We also held our inaugural Pathway to 2030 Forum where we brought together investors, listed companies, and sustainability experts to explore the real investment implications from action, and inaction, on critical sustainability issues such as biodiversity and climate change. A replay of the forum can be viewed here.
Overall, we received an overwhelmingly positive response to our questions from almost 100 of the ASX-listed companies approached, with 82% accepting that they had a role to play in protecting and enhancing biodiversity. However, there is significant progress required to get to where they really need to be in terms of action. Our most surprising finding was despite 82% of companies saying they believe they have a role to play in protecting biodiversity, 61% of companies do not have biodiversity as a material component of a policy and did not commit to developing one in the next two years.
We found the Real Estate, Mining and Energy sectors to be advanced in considering biodiversity in their daily operations. Many of these already have a biodiversity policy or have biodiversity as a material component of another policy, such as an Environmental Policy. We also found several Australian companies that are more advanced in finding ways to put a value on the net benefit (or loss) of biodiversity and even monetising it.
Unsurprisingly, the biggest issue that the survey reinforced was that there is a lack of consensus around how to consistently evaluate and manage exposure to the risks and opportunities regarding biodiversity. In this space, there are clearer skies on the horizon, and the company replies highlighted that technology around biodiversity measurement and disclosure are seen to be improving. There are also initiatives emerging which mirror the extensive work that has already been done on climate change, such as global frameworks like the Taskforce on Nature-related Financial Disclosures (TNFD) and the Science Based Targets for Nature (SBTN). Many companies are awaiting the final release of the TNFD framework in September 2023 to take any next steps, so this will be a real catalyst for change to watch out for.
Recognising that there is no “one size fits all” approach that will work for all industries and companies, we have put our findings into a best practice framework and we will be sharing this with the companies who participated in our survey. We will be using our extensive company engagement program with boards and management to provide guidance and to push for further positive change. This work also provides us with a further lens for looking at a company’s overall Sustainability, supplementing our existing work on issues such as net zero, shadow carbon costs, UN SDGs and Modern Slavery and helps further our mission of ‘Investing to Improve Lives’.
The following white paper provides more granular detail on our findings and our best practices framework.
Download the PDFRecognising that there is no “one size fits all” approach that will work for all industries and companies, we have put our findings into a best practice framework and have shared this with the companies who participated in our survey.
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