United StatesLondon, 16 June 2023 – New research published by Impax Asset Management (“Impax”) and independent academics from Imperial College London has highlighted the current limited scale of corporate action to protect biodiversity. The report sought to investigate what drives companies to protect biodiversity and to what extent their actions can be scaled up through the deployment of private investment capital. In response to its findings, the report includes recommendations for governments and companies, as well as suggested areas for further research into the topic.
The report, Protecting biodiversity: incentives for corporate action is based on independent expert analysis produced by academics from the Centre for Climate Finance & Investment at Imperial College Business School, through Imperial Consultants, and supplemented by input from Impax.
The report examines five case studies, which cover a diversity of sectors and regions and different motivational drivers for action. The case studies include a tree planting project in Madagascar in the agriculture sector; the introduction of new building standards to improve biodiversity in the UK property sector; efforts to enhance pollinator biodiversity by the European energy sector; the acquisition of forest land to protect a reservoir in the water sector in the US; and the theoretical case for integrating biodiversity restoration into insurance policies to lower long-term disaster risks.
As well as drawing out lessons learned from each case study, three main conclusions were derived from the report:
- Biodiversity concerns were not the primary drivers for corporate action in the cases that were examined. Aside from where they are required by regulation, actions to protect biodiversity are currently only pursued where they deliver broader corporate objectives. Motivations may be commercial – such as supply chain resilience – or related to other environmental, social and governance objectives, like ensuring a social license to operate.
- Drivers of action varied by sector. For example, in line with expectations that industries have greater incentive to invest in biodiversity conservation where they see direct benefits, sustainable sourcing emerged as a primary driver where products rely on the natural environment. By contrast, while consumer preferences can in theory yield reputational benefits, the case studies did not provide conclusive evidence of this.
- The scale of corporate action to protect biodiversity today is limited. It is therefore important that early movers are vocal about their actions and highlight their benefits for both the business and for nature.
Building on these conclusions, the report identifies actions for governments, companies and researchers which can encourage and enable nature-positive investments:
- Governments should address market failure through stronger regulation and incentives for corporate action, including by strengthening environmental licensing and making nature related disclosures mandatory.
- Companies must improve how they report and share information on efforts to limit their impact on biodiversity and restore nature. Alongside corporate disclosures on impacts and dependencies on nature, further efforts should be made to share information about successful nature-positive investments.
- Further research is needed into how private investments can be leveraged by public funding or philanthropy, the design of policies that price the value of biodiversity into financial decision-making effectively, as well as into the cost-benefit analysis of biodiversity-positive business models.
Chris Dodwell, Head of Policy & Advocacy, Impax commented:
“Our research highlighted that it is difficult to identify an example of a company pursuing biodiversity-related goals at scale as a primary objective. Until appropriate financial values are assigned to natural capital, regulation and policy incentives will likely remain the most effective way to encourage nature-positive investments.
“Governments should ensure that their regulatory frameworks promote action by the private sector, but should also use their full complement of policy levers, including tighter environmental licensing to create incentives for protecting and enhancing biodiversity. Finally, given the growing recognition of the systemic risks associated with biodiversity loss, we believe that governments should make the assessment and disclosure of impacts and dependencies on nature mandatory for companies.”
Julie Gorte, Senior Vice President for Sustainable Investment, Impax added:
“Accurately valuing nature is challenging for the private sector due to its vast but silent contribution. Policymakers are increasingly recognising the risks associated with the rapid destruction of our natural environment. However, the progress in addressing biodiversity loss lags behind climate action, resulting in limited alternatives to economic processes that harm nature. This research shows that corporations must rapidly evolve their practices to protect biodiversity and embrace the benefits that investments in natural capital can deliver.”
Dr. Alex Köberle, Advanced Research Fellow at the Centre for Climate Finance & Investment at Imperial College Business School, commented:
“We found that the motivations for corporate action varied by case study. Supply chain security emerged as a primary driver where companies rely on the natural environment for their products and services, as illustrated by the case studies of companies in agriculture and the water sector. Meanwhile, the energy sector case studies show how regulatory requirements can act as a key driver for many companies. One surprising outcome was that the case studies did not reveal consumer preferences to be a major motivating factor behind action; this was despite expectations that more biodiversity-supportive practices would be perceived to yield reputational benefits or higher product prices for companies.”
ENDS
Contact
| UK: Montfort Communications | Impax@montfort.london |
| Jack Roddan / Lesley Wang | +44 782 567 0695 / +44 77 523 2985 |
| US: RF | Binder | impax@rfbinder.com |
| Davis MacMillan | +1 (212) 994 7509 |
About Impax
Founded in 1998, Impax is a specialist asset manager, with £38.9bn / US$48.4bn AUM as of 31 May 2023, in both listed and private markets strategies, investing in the opportunities arising from the transition to a more sustainable global economy.
Impax believes that capital markets will be shaped profoundly by global sustainability challenges, including climate change, pollution and essential investments in human capital, infrastructure and resource efficiency. These trends will drive growth for well-positioned companies and create risks for those unable or unwilling to adapt.
The company seeks to invest in higher quality companies with strong business models that demonstrate sound management of risk. Impax offers a well-rounded suite of investment solutions spanning multiple asset classes seeking superior risk-adjusted returns over the medium to long term.
Impax has approximately 290 employees1 across its offices in the United Kingdom, the United States, Ireland, Hong Kong and Japan, making it one of the investment management sector’s largest investment teams dedicated to sustainable development.
1 Full-time equivalent
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