Resource extraction, industrialization, agriculture, urbanization, and pollution have significantly altered three-quarters of Earth’s land and two-thirds of the marine environment, putting one million species on the edge of extinction, says Lauren Compere, managing director, head of stewardship & engagement, Boston Common Asset Management.
Half of the global GDP depends on nature at some level, leaving industries across all sectors at risk. For example, 75% of food crops in agriculture rely on animal pollination, and 50% are at risk from soil erosion. In technology, battery innovation, data farms, and AI infrastructure depend on rare-earth minerals, gold, water, and energy.
Biodiversity is fundamental to these critical natural systems, from recycling nutrients in the soil to pollination to absorbing enough atmospheric carbon to keep temperatures tolerable. Forests, wetlands, and oceans absorb 5.6 gigatons of carbon yearly, but as the health of these ecosystems deteriorates, nature’s ability to absorb greenhouse gases diminishes, and the potential consequences will be catastrophic.
Uniting global ambitions
A global threat requires a global response, and several efforts are already in place. The EU Deforestation Act, the EU’s Corporate Sustainability Reporting Directive, and Article 29 in France require biodiversity disclosure to highlight impacts and dependencies on ecosystems. Investor-driven initiatives like the Finance Sector Deforestation Action (FSDA), the Finance for Biodiversity Foundation, Nature Action 100, and the PRI Stewardship Initiative on Nature set corporate expectations for managing biodiversity risks and impacts. And investors like Boston Common AM have been engaging companies on deforestation for decades.
A 2023 report by the UN University’s Institute for the Environment and Human Security released in late October highlights six risks threatening Earth’s system essential for human life:
● Accelerating extinctions
● Groundwater depletion
● Mountain glacier melting
● Space debris
● Unbearable heat
● Uninsurable future
The report, a must-read for CEOs, corporate executives, and policymakers, advocates for transformative systems-level change with a long-term sustainability focus. The findings make clear that current business and government efforts to address these six risks are insufficient.
For example, 21 of the world’s 37 largest aquifers—the primary drinking water sources for over two billion people—are being depleted faster than they can be replenished, with 70% of aquifer withdrawals going to agriculture. In this example alone, the food and water supply are in jeopardy for a quarter of Earth’s population.
Cause for ambition
Mindful of the dire state of Earth’s critical systems, there are outstanding resources that boards of directors, companies, and investors already have access to. Corporate boards can begin to better understand their role in promoting ecosystem resilience and sign onto ambitious commitments that came out of COP15 in Montreal, like the 30×30 pledge—which designates 30% of the Earth’s land and oceans as protected areas by 2030—and Target 15, which aims to reduce negative biodiversity impacts by improving corporate disclosure.
Companies can get started with the guidance of the Task Force for Nature-related Financial Disclosures (TNFD) and the LEAP methodology. LEAP helps companies interface with nature, evaluate dependencies and impacts, assess risks and opportunities, and develop necessary responses. The TNFD, meanwhile, proposes that boards and management align action and disclosure in the areas of governance, strategy, risk, impact management, metrics, and targets. Companies can go even further by partnering with industry players and stakeholders, using public policy engagement to support biodiversity protection, and aligning political and lobbying activities.
As COP 16 rapidly approaches, investors have a time-critical opportunity to accelerate their company engagement efforts to maximize impact. They can draw from the International Corporate Governance Network’s (ICGN) Biodiversity Action Toolkit and Viewpoint on Biodiversity as a Systemic Risk or use the TNFD framework and join collaborations such as Nature Action 100, an investor initiative supported by over 200 investors with $27trn in AUM that is addressing nature and biodiversity loss worldwide.
In discussions about integrating biodiversity and nature into climate action, I have called on boards and company executives to move from “nature-aware” to “nature-competent” by developing sustainability expertise, integrating a systems-level approach to climate and nature, using biodiversity assessments to inform decision-making, and formalizing board accountability and oversight with links to performance and compensation.
These are just a few of the many ways the investor community can hold companies and boards accountable for addressing their impacts on biodiversity. As engaged investors, we must also hold ourselves accountable for keeping business leaders informed and prepared for the considerable challenges and opportunities that lie ahead.
By Lauren Compere, managing director, head of stewardship & engagement, Boston Common Asset Management