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Engaging for Nature: An investor perspective on biodiversity by Esmé van Herwijnen and Jon Mowll

Engaging for Nature: An investor perspective on biodiversity

Esmé van Herwijnen Esmé van Herwijnen Senior Responsible Investment Analyst
Opinion

Engaging for Nature: An investor perspective on biodiversity

Esmé van Herwijnen

Esmé van Herwijnen
Senior Responsible Investment Analyst

Through the second quarter of 2020, EdenTree started a new thematic engagement on biodiversity. Amidst a pandemic caused in no small part by the destructive relationship between our economic system and nature, we assessed investee companies’ approaches to biodiversity. Many companies have a significant impact on biodiversity or rely heavily on ecosystems for their business model. Yet biodiversity is under threat: a recent IPBES report found that over 75% of the terrestrial environment is “severely altered” (66% for marine environments) by human actions and around 1 million animal and plant species are now threatened with extinction. Biodiversity has long been overlooked by investors. The goal of this engagement was threefold: establish what companies are already doing and the motives for companies to act to preserve and enhance biodiversity in their direct and indirect operations; identify best practice; and encourage better disclosure and reporting on the topic.

We targeted 20 companies held in the EdenTree funds in different sectors including construction & property development, construction materials, paper and forestry and food retail. We chose those sectors as all of them have significant impacts on nature and for some - especially food retail - their reliance on biodiversity and ecosystem functioning in its supply chains is very clear.  We were pleased that 18 companies responded to our engagement (only M&S and Sainsbury’s had not responded at the time of writing) and the discussions with companies have been fascinating and informative. Whilst not all companies have detailed biodiversity policies yet or advanced strategies, and even fewer are able to measure their impacts and efforts to reduce them, we have been encouraged by various initiatives.  Here, we share our key findings across the engagement stream.

 

 

How to measure biodiversity?

A common comment from the companies we talked to was the challenge of measuring and assessing biodiversity. Compared to climate change, where greenhouse gas emissions (irrespective of location) are used as a universally agreed indicator, biodiversity is a local issue, and standardised indicators do not yet exist. Companies are, however, trying to find proxies to assess biodiversity levels in their own operations and supply chains.

So what is a reliable way to assess biodiversity? Dialogue with construction companies and house builders revealed that ‘biodiversity net gain’ (as defined by DEFRA in the UK) can be a useful tool to compare biodiversity and ecosystem health before, during, and after land development.  Land Securities, for instance, confirmed it is using this methodology, and its supplier brief requires that biodiversity be left “in a measurably better condition” on its developments. According to representatives from Urban & Civic, a 10% ‘net gain’ is now viewed as best practice in the industry.

For other sectors, there are more complexities. In the forestry sector, we learnt from paper company BillerudKorsnas that its biodiversity index tracks six different metrics which are considered to promote biodiversity in the long term; this includes, for example, the amount of dead wood left in the forest, or the number of deciduous trees.  In agricultural supply chains, certification bodies remain the most commonly cited method to ensure biodiversity is taken into account and protected – so far, company reporting has focussed on the percentage of commodities that have received ‘sustainable’ certifications from bodies such as the RSPO (Roundtable on Sustainable Palm Oil) for palm oil or MSC (Marine Stewardship Council) for seafood. Companies are well aware of the measuring and reporting challenges; it was therefore welcome to see many targeted companies working in partnership with external bodies to develop frameworks that can be used in the future.

 Multi-Stakeholder Collaboration 

The complexities around assessing biodiversity and ecosystem health has led companies across these sectors to partner with various scientific & academic bodies, local experts, NGOs, and wildlife groups.  In addition to help with assessment methodologies, these partnerships can assist with developing policies and practices to protect, conserve, and enhance biodiversity.

Imerys, with over 233 active quarries, has established a scientific partnership with the French Museum of Natural History, the French Biodiversity Agency and the French National Centre for Scientific Research to advise and support the Group’s biodiversity programme.  External expertise helps guide the development of Imerys’ global approach to biodiversity, establish pilot projects on specific sites, and contribute to training and awareness-raising initiatives within the company.  The idea is that once close collaboration on pilot projects bears fruit, the findings can be used to roll out initiatives, policies, and guidance standards for biodiversity protection and assessment across all sites.

As well as making human society more vulnerable to zoonotic diseases like SARS-CoV-2, the destruction of Earth’s intricate webs of life creates a “species loneliness” – a “deep, unnamed sadness stemming from estrangement from the rest of Creation, from the loss of relationship." 

Similarly, Tesco has an established partnership with the World Wide Fund for Nature (WWF), which has been ongoing since 2018. WWF provides support in several key areas. For instance, when the company is looking to establish sector-specific guidance on biodiversity (e.g. for cereal crops, dairy, meat, etc.), WWF’s experts will advise on the process and review proposed policies/standards. Similarly, the partnership has facilitated cross-sector collaboration to address run-off and excessive nutrients in waterways in East Anglia which can cause algae.  A running theme throughout our engagement was the need to partner with as many stakeholders as possible to share knowledge and forge connections with other groups working on biodiversity.

Educating Around Biodiversity  

Related to collaborations with different stakeholders are efforts around biodiversity education – of employees, communities, suppliers, and customers.

French food retailer Carrefour, for instance, has begun to encourage beekeepers to establish hives in the vicinity of stores. Honey from the hives is sold in store, and a non-invasive camera is set up in the hives to show how the honey is produced, and how the colony functions as a complex and inter-related system of individual bees.  Such initiatives are relatively simple to set up, can help customers understand the provenance of what they are buying, and can bring customers and staff a little closer to the lives of beekeeper and bee.

A further interesting example came in the housing sector, with Urban & Civic, which specialises in acting as Master Developer on large-scale strategic sites. Once the company’s involvement at a given site comes to an end, management of – and care for – surrounding landscapes and ecosystems is effectively handed over to the local community.  U&C’s focus, therefore, is on ensuring that sites can be managed and maintained, and that long-term resilience is built into the landscapes.  Exemplary work has been carried out on one of its sites near Rugby, in the West Midlands, where local communities have been actively involved in wildlife surveys and ‘Bioblitz’ events, helping to foster a sense of care, respect, and love for local biodiversity – whether bats, badgers, or butterflies.

Education of customers is also an intention for Marshalls, a manufacturer of hard landscaping products. Whilst Marshalls’ facilities have achieved The Wildlife Trusts' Biodiversity Benchmark for Land Management, the company’s Sustainability Team is now looking at signalling the biodiversity credentials of its products.  Customers are increasingly familiar with different products’ water-permeability and life-cycle carbon emissions, but product-related biodiversity impacts remain difficult to assess or quantify. Ultimately, the company hopes to provide customers with a set of traffic-light indicators for ‘water’, ‘carbon’ and ‘biodiversity’ for Marshalls’ products, to convey life-cycle impacts across those areas.

 


Case study: Biodiversity in the food supply chain

As outlined, the engagement targeted companies in a range of sectors, including food retailers and consumer goods. Biodiversity is particularly relevant for companies in this sector, as their entire business model depends on biodiversity and ecosystem services. Many of the products sold in our supermarkets rely on pollination, healthy soils, and species which predate ‘pests’.  Failure to address biodiversity loss may impact each of these, with potentially severe consequences for food security. Speaking to food retailers has been fascinating and those companies willing to speak to us all showed good awareness of the importance of biodiversity. We were particularly impressed by the work of Carrefour; it has set a target to support 500 or more farmers in converting to organic farming methods by 2022, but also encourages agro-ecology practices for its non-organic product lines. Long-term offtake agreements on volume and price encourage farmers to make these transitions, safe in the knowledge that they are financially secure.

Biodiversity considerations also feature (sometimes indirectly) in requirements of suppliers. Carrefour demands no use of genetically modified feed for salmon, and no antibiotics used in seafood farming, whilst WM Morrison encourages minimising the use of pesticides. Food retailers Tesco and Metro both signalled work in progress on different methodologies to asses and monitor biodiversity. Tesco currently works with WWF to develop a ‘sustainable basket’ metric, which includes product specific biodiversity scores as well other sustainability indicators, and Metro is piloting a methodology (a decision tree for integrating biodiversity) developed by the Natural Capital Coalition together with the Cambridge Institute. We look forward to finding out more about progress made with these and similar initiatives in the sector.

Concluding Remarks

As well as making human society more vulnerable to zoonotic diseases like SARS-CoV-2, the destruction of Earth’s intricate webs of life creates a “species loneliness” – a “deep, unnamed sadness stemming from estrangement from the rest of Creation, from the loss of relationship." It is clear from our engagements that businesses can have a beneficial impact on nature; whether they do will determine all our futures, and those of countless species with whom we share our planetary home.  We will continue to engage constructively with companies on the matter of biodiversity, and we hope that other investors follow suit.

 

References 

1. Intergovernmental Science Policy Platform on Biodiversity and Ecosystem Services, Summary for Policymakers (SPM) of the Global Assessment report on Biodiversity and Ecosystem Services.

2. We engage across all funds under management, institutional, retail and charity, and therefore this may include companies excluded on ethical grounds in the Amity Funds, but allowed elsewhere.