Investors have an important role to play in conserving biodiversity. Instead of waiting for regulations, investors should develop standards together and put pressure on companies. This is what Ronald Wuijster, CEO Asset Management at APG and chairman of the World Economic Forum's Biodiversity Finance Steering Committee, is advocating.
This week, nearly 2,500 international politicians, CEOs, journalists and intellectuals are gathering in Davos, Switzerland, for the annual meeting of the World Economic Forum. Their common goal is to address the world’s economic and social problems.
I am attending for the first time this year. The World Economic Forum’s risk reports are widely circulated and show, year after year, that climate and biodiversity risks are increasing. For me, this is a great opportunity to get an inside look at the organization behind those reports. It is also a great opportunity to get a feel for the changing geopolitical relationships. Global developments such as deglobalization, rearmament and inflation can have important consequences for our investments. In Davos I will have the opportunity to discuss these developments with colleagues, for example, in the meetings with Focusing Capital on the Long Term (FCLT) and the Global Investors for Sustainable Development (GISD) Alliance. As a board member of these organizations, I am committed to investing in long-term sustainable development.
As a long-term investor, our investment horizon is infinite. Our clients are Dutch pension funds, and we want to ensure good pensions in a livable world. That world is increasingly threatened by a decline in biodiversity. That was also one of the motivations for me to accept the role as chair of the World Economic Forum’s Biodiversity Finance Steering Committee. Not necessarily because I am a biodiversity expert, but because I want to mobilize investors and companies to jointly address the problem of biodiversity loss. Because it is precisely this joint effort that is needed.
Biodiversity: what can investors do? 4 steps
A lot has been written about the urgency and complexity of biodiversity loss. The question is: what can we do about it? International agreements and regulations by governments and regulators can help, in the sense that they can act as a big stick. But a plethora of new rules and regulations also encourages box-ticking. Regulations do not bring about the kind of fundamental change that is needed to ensure that companies have a “nature-positive impact”. That change has to come from within the financial sector.
Step 1: Developing common standards together
To achieve this change, I see four concrete steps. The first, crucial step is to develop common standards to assess how our investments contribute positively or negatively to biodiversity. How they are exposed to biodiversity risks. And how we get the data to measure it. At APG, we are already involved in the development of a number of such standards. For example, we are affiliated with the Taskforce on Nature-related Financial Disclosures (TNFD) and we collaborate with the Partnership for Biodiversity Accounting Financials (PBAF). In addition, we recently signed the Finance for Biodiversity Pledge, in which we agreed to protect and restore biodiversity.
Step 2: Identifying risks
Once the standards are in place, it will be easier to clearly identify the biodiversity risks in our investment portfolios, set targets and report on them. That is the second step. Based on the work that is already in place, we have already made a biodiversity footprint of our investments at APG.
Step 3: Achieving positive change through engagement
To reduce risks and bring about positive change, we put pressure on companies through engagement - step 3. We are tightening our criteria for companies with respect to biodiversity. The transformation of the food chain will largely have to come from the companies that are currently active in it. This makes engagement with these companies even more important. Given the complexity of the issue, it is important not only to use our own influence, but also to collaborate with other investors.
Step 4: Investing in solutions
Finally, we want to actively invest in solutions that contribute to the protection of biodiversity. For example, we have invested in a large production forest in Chile. This forest is being managed sustainably and has the FSC (Forest Stewardship Council) label. We hope to see more of these kinds of investment opportunities. Public-private partnerships can play an important role in this. The government and pension investors then pull together to make important and substantial investments. We already do this internationally, but in the Netherlands, the opportunities are limited. For several years, ABP and APG have therefore been taking the initiative to talk to government bodies and other pension administrators about more opportunities for public-private partnerships.
If we, as long-term investors, take up our roles and join forces, I am convinced that we can make a significant contribution to the preservation of biodiversity. My proposal for a four-step plan is a first step, which I am happy to discuss with fellow investors. Let’s get started.