Two investment firms made proactive moves to start tackling the nature-related risks of their portfolios this week, signalling a growing focus on this emergent sustainability topic in the investor community.
Fidelity International announced its first nature roadmap, setting out commitments and the strategies it plans to use to assess and reduce the natural impact of its financing activities – with a goal to release its first nature-related disclosures by 2025.
The roadmap includes governance, data and technology as well as advocacy commitments, in an effort to integrate nature into Fidelity’s investment and stewardship processes – including voting activities and capital allocation.
Fidelity International Nature Roadmap: waiting for scenario guidance
While the momentum for nature-related disclosures is certainly growing, it is currently missing a key piece of the puzzle in the form of regional nature and biodiversity scenarios – and this is something Fidelity is aware of.
While it aims to integrate scenario analysis into risk management practices, the firm says it is waiting for “the future development of guidance for financial institutions to commence this work (...) given the nascency of work in this area”.
The roadmap is broadly aligned with the recommendations of the Task force on Nature-Related Financial Disclosures (TNFD) and includes the setting of specific targets, which are currently under development. Interestingly, the roadmap is to be managed directly by the CEO, despite the fact that Fidelity’s Chief Sustainability Officer Jenn-Hui Tan sits on the Finance for Biodiversity Foundation’s Advisory Board. However, it is likely that the firm’s growing sustainable investment team will be executing the strategy.
Nuveen: new Head of Nature-Based Solutions
Meanwhile Nuveen, a US-based fund with more than US$1 trillion of assets under management, has appointed its first Head of Nature-Based Solutions, as part of its Natural Capital arm. Nicholas Moss was previously Managing Director of the AGRI3 Fund, and has 15 years of experience in leading investment into forestry, agriculture and climate action.
At Nuveen, he will be responsible for the fund’s investment strategy into nature-based solutions, including farmland, forestry and ecological restoration, reporting to Global Head of Asset Management Skye MacPherson.
Growing momentum to tackle nature-related risks in investments
Research has shown that financial institutions have a long way to go in taking nature-related risks into account in their financial planning, despite the fact that more than half of global GDP is estimated to be at risk from nature loss.
But this is changing, partly because of sustainable finance regulation like the EU Taxonomy, which will require financial institutions to start tracking their nature and biodiversity impacts from January 2024.
In September this year, 190 investors with US$23.6 trillion in assets under management released their expectations for companies on nature action, as part of the Nature Action 100 initiative. The two recent announcements by Fidelity International and Nuveen, which together manage almost US$2 trillion, suggest that nature-ambitions are now being translated into concrete operational decisions.
“By starting to quantify and capture the environmental externalities, investors can help nudge the world towards a path in which both people and planet can thrive,” said Dr Douglas Gurr, Director of the UK’s Natural History Museum in a foreword to Fidelity’s nature roadmap.