In the wake of a new report criticising asset owners’ failure to consider biodiversity in their investment decision making, Asian investors have been singled out as laggards in what is an increasingly important area for stakeholders and society at large.
Andrew Mitchell, vice chair of the stewardship council at the Taskforce on Nature-related Financial Disclosures (TNFD), a UK-based organisation whose membership of 40 financial institutions, corporates and market service providers, collectively account for more than $20 trillion in assets, said that awareness among family offices and institutional investors in Asia lagged that of the US and Europe.
Mitchell wrote the foreword on a report by the Association of Investors for Sustainable Development (VBDO), which found that 42% do not yet give biodiversity a place in investment decision-making.
"Many Asian families running profitable businesses have the fortunes of the next generation firmly in their minds. But when it comes to protecting the environment, upon which their wealth may depend, there has been a blind spot for decades," said Mitchell.
"It’s the same with ESG. Most Asian companies are significantly behind the competition and do not yet score highly on ESG. It's time for that to change."
“An Asian asset manager once said to me: In China, we are asking, what’s the point of a pension fund, if, when it pays out, you cannot breathe the air and the world is dead? Pension fund trustees have a mandate to act ‘prudently’ with their client’s funds. But is investing in companies that destroy nature or pollute our atmosphere acting prudently?” he noted, in his foreword to the report.
“Investors [realise] that protecting biodiversity and the urgency that a healthy planet is essential for a healthy economy. Yet a good portion of the parties surveyed are not yet paying attention to this,” Jacqueline Duiker, senior manager for sustainability and responsible investments at VBDO, told AsianInvestor.
The VBDO report, which surveyed 60 financial institutions, was published on October 23.
The Netherlands-based association’s members include many of the country’s leading pension funds, including ABP, PFZW, BPL and DSM, as well as the world’s largest investment managers, including BlackRock.
Some instititions in Asia are cognisant of the importance of this issue.
A spokesperson for the New Zealand Superannuation Fund (NZ Super) told AsianInvestor that the fund was an active member of the Responsible Investment Association Australasia’s (RIAA) Nature Working Group, which is working to help members meet their stewardship responsibilities to protect nature and biodiversity in their business operations and their portfolio of companies.
“One of our investment beliefs is that ESG considerations, including threats to natural capital and biodiversity, are fundamental to any calculation of long-term risk and return,” the spokesperson said, pointing to the requirement contained in the legislation that established the fund to avoiding prejudice to New Zealand’s reputation as a responsible member of the world community
Claire Molinari, head of ESG at Australian super fund CareSuper and co-chair of the natural capital group at RIAA declined to comment for this story.
OBSTACLES ARE NO EXCUSE
VBDO's Duiker noted that one reason often cited by investors and companies for not doing more on natural capital is the lack of available data. But she said a shortage of data should not hold investors back.
“Too little available data should never be an excuse for not getting to work on biodiversity. There are still plenty of steps to be taken. Consider the development of uniform terms and transparent measurement methods. Or...putting the urgency of biodiversity conservation more strongly on the agenda within the financial sector,” she said.
Christine Wortmann, greening finance Netherlands head at the World Wildlife Fund, on publication of the report, said that the financial sector needed to engage urgently with the issue of natural capital.
“Biodiversity is the backbone of our planet and an integral part of our economy…. There is still a large number of organisations that need to get to work.
"Therefore, we urge them not to wait any longer. Preserving biodiversity is both an ethical duty and essential for the stability and resilience of our financial markets,” she said.