Leading experts share evolving best practice on how asset owners are handling exposures to risks, impacts and dependencies relating to biodiversity loss.
COP30 – the COP in the forest – has confirmed what many asset owners have known for some time: that climate change and nature degradation are two sides of the same coin. For policymakers and institutional investors, these two systemic risks are entwined and cannot be addressed in isolation. Climate change after all is one of the five drivers of biodiversity loss; the ecosystem services provided by thriving biodiversity support resilience against the physical impact of climate change.
Belém has seen a steady stream of announcements aimed at better integrating nature into economic policy and investment decision-making processes. Much attention has focused on Brazil’s bold attempt to channel US$125 billion of public and private capital into nature stewardship in order to reverse deforestation and preserve biodiversity. But other initiatives highlighted at COP30 are also adding crucial momentum, providing guidance and tools that make it easier to identify and assess risks and opportunities.
Asset owners have found it a steeper challenge to understand and act on the nature-related risks in their portfolios, compared to reducing their financed emissions in response to climate change. This reflects the inherent complexity of ecosystems and our dependencies on them, the evolution of scientific knowledge (and the methodologies and data that flows from it), and the still-nascent policy landscape.
But asset owners are already engaging with asset managers and portfolio companies, and increasingly integrating nature-positive elements into their engagement strategies, especially when it comes to assessing transition plans. Across sectors, geographies and asset classes, the extent of this activity reflects the growing realisation that natural capital is central to managing systemic risk in long-term investment strategies.
Part of Sustainable Investor’s monthly theme, this first of two Q&As (the other will focus on opportunities for investors) seeks to reflect best practice in the evolving area of identifying and addressing biodiversity-related risks, impacts and dependencies. This feature provides comment and insight from leading experts on the tools and methods being used by asset owners, the actions being taken on capital allocation and engagement, and the policies and regulations being implemented to achieve the goals of the Global Biodiversity Framework.
Q1: Where are the most financially material exposures to risks, impacts and dependencies relating to biodiversity loss?
Sara Taaffe, Responsible Investment Analyst, Church of England Pensions Board:
“Biodiversity is fundamental to the health of ecosystems that underpin our economies and society. Yet it is being eroded by extractive economic activity that fails to account for the value biodiversity provides. As an asset owner, we acknowledge that this erosion represents a systemic risk – one that threatens our ability to deliver sustainable returns for beneficiaries well into the next century. Addressing this challenge requires bold, coordinated action and a commitment to solutions that reflect the complexity of biodiversity loss. To respond, we are leveraging the tools available to us as investors – policy advocacy and corporate and systemic stewardship – to drive change at scale.”
Anita de Horde, Executive Director, Finance for Biodiversity (FfB) Foundation:
“Looking at sectors, our 2023 study of 2,300 companies within the MSCI All Country World Index (MSCI ACWI) universe found that ten priority sectors cover 30% market cap and 70% biodiversity impacts: oil, gas & consumable fuels; chemicals; metals & mining; paper & forest products; automobiles; consumer staples distribution & retail; beverages; food products; pharmaceuticals; and electric utilities.
“From an asset class perspective, listed equities and corporate bonds are consequent channels of exposure due to the large number of listed companies in high-impact sectors. Corporate lending faces similar risks, particularly where borrowers operate in land- or resource-intensive industries vulnerable to new biodiversity regulations or ecosystem degradation. Sovereign debt carries systemic risk linked to countries’ dependence on natural capital and environmental governance. Real assets face the most direct, location-specific impacts, with asset value closely linked to land use and ecosystem extent and condition.
“It is important to also highlight that the geographies where companies have activities or assets are located also influence the extent of the materiality that these assets may have on nature, both from an impact and risk perspective. Overall, these exposures highlight the need for asset owners to integrate nature-related risk assessment and spatial analysis across sectors and asset classes.”
Sophie Lawrence, Stewardship and Engagement Lead, Rathbone Greenbank:
“This will depend on the type of investor and the make-up of its investees. The first step in an assessment is to prepare a heatmap to identify areas of an investment portfolio or operations that have high concentrations of higher-risk impacts and dependencies and may require further analysis. This can summarise potential exposure to nature-related risk, revealing where investee companies materially depend upon or impact nature. The data source most used for heatmapping by investors is the ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) tool, which is simple to interpret, publicly available and broadly comparable across sectors.
“You can either produce a heatmap for your whole investment portfolio, or you can narrow the scope by restricting the scope to priority sectors that are deemed to have the highest potential impacts on nature. For example, Finance for Biodiversity’s Nature Target Setting Framework for Asset Managers and Asset Owners recommends that investors select companies which fall within priority and secondary sectors.”
Libby Sandbrook, Business & Nature Director, Fauna & Flora:
“The biggest risk exposures are in sectors heavily reliant on nature such as agriculture, forestry and fisheries; and those that – while less directly dependent – can have a significant impact, such as mining and infrastructure.
“Industries that are dependent on nature tend to be deeply intertwined with biodiversity and ecosystems and when these degrade, the financial risks – related to operational, regulatory and reputational risks – can be significant.
“Agriculture, for example, is dependent on a range of ecosystem services which are vulnerable to biodiversity loss including pollination, soil fertility, water availability and pest control. A decline in pollinators, soil degradation and water scarcity can reduce yields and increase costs – and ultimately increase volatility in yields which can have knock-on effects such as higher insurance premiums and volatility in commodity prices.”
Q2: What are the key practical challenges involved in identifying and quantifying the financial materiality of above, as well as measuring effectiveness of responses?
Tom Hegarty, Associate Director – Transition Planning & Targets, Taskforce on Nature-related Financial Disclosures (TNFD):
“In our open consultation on identification, assessment and disclosure of dependencies and impacts on nature in financial portfolios, the key practical challenges are:
- data gaps;
- inconsistency in how data are produced across organisations;
- lack of transparency about data definitions and methodologies; and
- conceptual and methodological challenges of aggregating dependencies and impacts to the portfolio level.
Nevertheless, there is strong evidence financial institutions and corporates are identifying financial effects of nature-related risks. The TNFD 2025 Status Report found that 58% of investors found the first generation of TNFD reports had been useful in guiding risk management.”
Laura Moss-Bromage, Planet Lead, Responsible Investment, Church Commissioners for England:
“Data is really challenging. Much of it is based on proxies or sector averages to ‘heat map’ the sectors most at risk. This tends to overlook supply chain vulnerabilities, masking true financial exposure, particularly for sectors like consumer goods which rely on nature-dependent and climate-sensitive upstream commodities.
“We’re engaging with firms in the food and agriculture space on their commitments and targets relating to regenerative agriculture, particularly through Nature Action 100. Without reporting that demonstrates how regenerative practices reduce risk, improve ecosystem condition and strengthen the long-term financial resilience of farmers and supply chains, it’s hard to assess whether these initiatives are resilience tools or just sustainability badges.”
Rebekah Mooers, Lead Risk & Biodiversity Product Specialist, Clarity AI:
“First, biodiversity lacks such a consensus metric, unlike climate change, resulting in a wide array across various dimensions like water, land use, and pollution. While these enhance the understanding of sustainability, they can overwhelm investors who need to identify which metrics align with their specific risks and opportunities. Frameworks like the Taskforce on Nature-related Financial Disclosures (TNFD) help, but the variety of methodologies, particularly regarding biodiversity foot printing, makes consistent assessments challenging.
“The second difficulty is the uneven availability of environmental data. Many companies still do not disclose information on water consumption, waste generation or air pollution, crucial for understanding biodiversity impact. Carbon emissions are generally well reported, but without comparable data availability for these other metrics, it remains difficult to link corporate activity to biodiversity loss in a robust way.
“Finally, there is a lack of detailed data on physical assets such as mines, oil and gas facilities, or electric utility facilities, information which is essential for assessing mitigation and dependency-reduction measures. Most companies do not disclose where these physical assets are located, how much they produce, or how their supply chains operate. This absence of detailed, production-weighted insights can leave biodiversity risk assessments incomplete, possibly obscuring where the most financially significant exposures lie.”
Norah Berk, Senior Programme Manager – Nature, Institutional Investors Group on Climate Change (IIGCC):
“Biodiversity-related risk presents multiple, often geographical- and value chain-specific challenges. This complexity means that while approaches to addressing these risks may share common principles and face similar barriers, they still need to be assessed on a case-by-case basis.
“For investors, several factors make it difficult to assess the financial materiality of biodiversity loss. These include limited availability of asset-level location data, a lack of consistent and comparable data, and the diverse, often compounding interrelated effects of nature-related risks. Uncertainty around potential systemic impacts – such as the crossing of ecological tipping points – adds further difficulty.
“The relative early stage of investor engagement on biodiversity risks is also a limitation. At IIGCC, we work to address this gap in awareness and capability through capacity-building workstreams such as our sector working groups, the Engage Series, and collaborative engagement initiatives such as Nature Action 100.”
Q3: What are the most effective stewardship and engagement tactics available to asset owners looking to minimise exposures to biodiversity loss?
Sonya Likhtman, Director, Asia & GEMs, EOS, Federated Hermes Limited:
“Direct engagement is often an effective stewardship approach, especially as companies are increasingly recognising how their business model is embedded in nature and reliant on ecosystem services. Engagement at the board level is especially valuable for understanding the governance and oversight of nature, and ensuring a strategic focus on nature-related risks and opportunities.
“AGMs provide an important touch point for ensuring that material nature-related topics are firmly on the board’s agenda, both through voting decisions and raising questions. Shareholder proposals on nature-related topics have continued to feature this year, including in Australia on deforestation and sustainable seafood for retailers and on deforestation for banks.
“The theme also benefits from a range of collaborative engagement opportunities, including Nature Action 100, FABRIC, and the Investor Initiative on Hazardous Chemicals.”
Anita de Horde, FfB Foundation:
“If delegating engagement, the essential first step for asset owners is to check managers’ policies and capabilities align with their own nature strategy – reallocating mandates if they don’t.
“We’d also recommend applying our five-step V-process including: assess the most material sectors and companies in terms of nature impacts and dependencies across the overall portfolio and individual mandates; set nature targets to reduce negative and increase positive impacts; and establish an engagement strategy and process that supports the overall nature strategy and its targets.
“Asset owners should communicate nature targets and expectations of key actions to target companies, remembering that alignment with collective investor expectations helps to increase impact. Persistence is often the most effective tool; set realistic timeframes for achieving the engagement objectives and ensure adequate resources.
“All engagement approaches are more effective when they are:
- Focused on a specific nature topic or narrow range of topics;
- Targeting something that is clearly within the remit of the company to address in its direct operations and/or supply chain;
- Supported by deep knowledge of the company’s operational strengths and weaknesses and its business strategy; and
- Accompanied by support in terms of achievable best practice examples, capital commitments, etc.”
Tim Polaszek, Engagement and Education Director, Capitals Coalition:
“Nature-related issues need to be visible as risk drivers, strongly connected to portfolio resilience and also considered as investment opportunities. As recently highlighted by a new publication from the Taskforce on Nature-related Financial Disclosures, asset owners can ask better questions to the managers that they delegate investment selection to. Asking deeper questions around how nature-related issues are reflected not only in the operations of the portfolio companies but also across their governance, strategic decision-making, and finance business units will demand reflection and analysis. The frameworks, methods, and data are available for a much clearer insight into how nature and the services it provides our economy can behave. If it is invested in, it will provide resilience, if it is left to degrade, the costs will be borne by business and society alike.”
Julien Moussavi, Head of Sustainable Fixed Income Product, FTSE Russell:
“Effective approaches include advocating for TNFD-aligned disclosures and nature-related targets, as well as participating in collaborative initiatives such as investor coalitions, like Nature Action 100. Encouraging supply chain transparency and traceability is critical, alongside promoting science-based targets for nature through frameworks such as the Science Based Targets Network (SBTN).”
Q4: How can / should asset owners adopt an integrated approach to climate and nature systemic risks to minimise their contribution to the drivers of biodiversity loss?
Laura Moss-Bromage, Church Commissioners for England:
“Taking an integrated approach is helpful because we often talk about the same levers of influence and we should take learnings from our work on climate. We support climate transition plans that incorporate nature, because focusing solely on climate risks missing hidden risks and opportunities for value creation. However, integration must go beyond recognising co-benefits to identify and manage potential trade-offs between decarbonisation solutions and nature outcomes.
“Deforestation is an example of an issue that cannot be categorised as purely a climate or biodiversity issue. In our Climate Action Plan 2.0, we included our TNFD transition pilot on deforestation as an example of a practical entry point for integrating nature into climate strategies.”
Sajeev Mohankumar, Senior Technical Specialist, Climate and Nature, FAIRR Initiative:
“Leading asset owners are broadening their definition of portfolio risk to include nature alongside climate. Practically, this means extending the approaches used for climate risk (like scenario analysis and target-setting) to cover biodiversity. For example, pension funds are beginning to adopt the TNFD framework in tandem with TCFD, mapping how portfolio companies depend on and impact nature. Asset owners can set dual targets by committing to net zero emissions and nature-positive outcomes. The Net Zero Asset Owner Alliance has already called for a clear 2050 roadmap linking food security, climate, and biodiversity goals.
“Integrated analysis also avoids unintended consequences. Examining investments for climate–nature ‘trade-offs’ ensures a solution for climate doesn’t inadvertently harm nature (or vice versa). In practice, this might mean prioritising win-win strategies like agroforestry, regenerative agriculture and protein diversification that deliver both climate benefits and biodiversity gains. It also means shifting capital away from ventures that help climate but hurt ecosystems (e.g. mitigation solutions that still incentivise intensive production systems). Ultimately, asset owners should embed nature and climate considerations into one coherent risk management process, backed by governance structures and expertise for both.”
Robert-Alexandre Poujade, Biodiversity Lead, BNP Paribas Asset Management:
“Currently, macroeconomic scenarios and corporate disclosures are heavily focused on achieving net zero emissions by 2050. While this is an important goal, it overlooks the critical role that biodiversity plays in maintaining ecosystem services and supporting human well-being. A more comprehensive approach to sustainability is needed, one that takes into account the interconnectedness of environmental, social, and economic systems.
“Asset owners are ultimately exposed to all the economic consequences linked to the change of dynamics of the planet. Therefore, being aware of Earth tipping points is a necessary first step to have a better understanding of the investment trade-offs between carbon, biodiversity and social dimensions. For example, large-scale hydroelectric power is seen as a solution to produce low-carbon electricity, but can also have large impacts on terrestrial and aquatic biodiversity.”
Christian O’Dwyer, Head of Nature Solutions, Bloomberg:
“Many investors are handling nature jointly with climate, by embedding biodiversity KPIs into climate mitigation frameworks and analysing nature related impacts and dependencies on screening for climate investments. TNFD’s LEAP framework (Locate, Evaluate, Assess, Prepare) supports dual-risk integration. In addition, investors can integrate stewardship on climate and nature issues to drive more holistic engagement and capital allocation decisions.”
Q5: How should asset owners respond to the proposed increase in protected areas under the Global Biodiversity Framework (GBF)?
Romie Goedicke, Nature Co-Lead, United Nations Environment Programme – Finance Initiative:
The GBF’s headline objective of ‘30 by 30’ – to protect 30% of land and sea for nature by 2030 – is not an empty slogan, rather the foundation for living in harmony with nature by 2050. It provides asset owners with an avenue for forward-looking finance management and can drive community-led conservation, not just paper designations. The International Union for Conservation of Nature’s 30×30 guide can help asset owners implement the global target for effectively and equitably conserving at least 30% of the Earth by 2030. They should:
- Update fiduciary/mandate documents to recognise biodiversity and protected-area expansion as systemic financial risks and opportunity areas;
- Map portfolio holdings to geospatial layers (current protected areas, areas proposed for designation, high-biodiversity/hotspots, Indigenous territories, and supply-chain sourcing regions);
- Engage with national policy processes (NBSAPs / national biodiversity finance plans) to support practical implementation pathways and to ensure investor-friendly, well-governed mechanisms for financing protected areas;
- Engage top emitters / high-risk companies to secure disclosure of site-level biodiversity dependencies and impacts, ideally aligned with the TNFD; and
- Redirect new capital toward nature-positive investments whilst supporting effective management and equitable governance.
Carlota Garcia-Manas, Head of Climate Transition & ESG Engagement, Royal London Asset Management:
“The proposed expansion of protected areas under the GBF’s 30×30 target highlights growing recognition of the need to safeguard biodiversity. Public and scientific support for conservation is increasing and governments are beginning to respond with policy measures. For investors, this may involve preparing for nature-related transition risks, such as potential restrictions on agriculture, mining, or forestry, that could influence commodity markets, supply chains, and asset valuations.
“It is equally important that conservation efforts are socially and economically responsible. Historical approaches, such as ‘fortress conservation’, have sometimes led to adverse outcomes, including the displacement of Indigenous communities. Investors can play a constructive role by encouraging inclusive, rights-based conservation models that respect local communities and incorporate social safeguards.”
Gayaneh Shahbazian, Engagement Manager, Biodiversity and Stewardship, Morningstar Sustainalytics:
“The expansion of protected areas will reshape the risk landscape for investors. Asset owners should treat geolocation data as essential – mapping where portfolio companies operate against biodiversity priority areas can highlight emerging transition risks and engagement priorities.”
Q6: What policy measures are most needed to help investors assess and address financially material risks posed by biodiversity loss?
Sonya Likhtman, Federated Hermes Limited:
“Sectoral transformation pathways on nature, as recommended by WWF and the Green Finance Institute in the UK, are key for guiding action at the sector and company level to mitigate negative impacts on nature and scale up positive business practices. Sector-based approaches should be accompanied by aligned economic incentives.
“Policy and regulatory measures can support the adoption of improved disclosure and integrated transition plans. For both the UK and Australian consultations on transition planning policy, we recommended the adoption of integrated climate and nature transition plans.
“Action from central banks and financial regulators is essential to account for the systemic nature-related risks that are difficult for any individual organisation to capture.”
Sara Taaffe, Church of England Pensions Board:
“Policy advocacy is critical to long term change. We co-founded a global coalition of investors representing US$2.5 trillion AUM, urging governments at Biodiversity COP16 to take bold policy and regulatory action to halt and reverse biodiversity loss. Understanding that policies must be implemented effectively within jurisdictions, and that lobbying can undermine or accelerate progress, we are applying lessons from our work on climate lobbying to nature-related policy engagement. Our immediate focus is supporting the implementation and strengthening of the EU Deforestation Regulation (EUDR).”
Norah Berk, IIGCC:
“Asset owners have opportunities not only to engage with companies, but also with policymakers who shape supportive regulatory frameworks. Investors would benefit from a consistent and predictable policy environment that facilitates financial flows and incentivises best practice in identifying, managing, and mitigating biodiversity-related risks.
“Central banks also have a crucial role to play, in assessing and recognising nature and biodiversity loss as a source of material financial risk and setting expectations for financial institutions to manage these risks in line with their fiduciary duties. Regulation can drive change within the real economy – for example, the EU Deforestation Regulation would require companies to reduce their impacts on nature. Improved disclosure of reliable, decision-useful data would further strengthen investors’ ability to assess and respond to these risks.
“Investors can accelerate policy progress by engaging directly with policymakers, or participating in engagement platforms and coalitions, co-signing letters or joint statements, and engaging companies on their lobbying practices and calling for regulation that will advance global frameworks such as the GBF.”
