Major investor sets out biodiversity, climate expectations for portfolio firms

Published 08:17 on February 7, 2023  /  Last updated at 08:17 on February 7, 2023  / Stian Reklev /  Biodiversity

Aviva Investors has named nature loss and climate change as two of its three main focus areas for 2023, and has written a letter to the 1,600 companies it has invested in, outlining the actions it expects them to take on these issues.

Aviva Investors has named nature loss and climate change as two of its three main focus areas for 2023, and has written a letter to the 1,600 companies it has invested in, outlining the actions it expects them to take on these issues.

The global asset manager, which has £232 billion in assets under management, pens a letter each year to companies in which it is a share- or bondholder, setting out its priorities that will impact its voting in its portfolio companies.

For 2023, it has defined tackling the cost-of-living crisis, transitioning to a low-carbon economy, and reversing nature loss as its three main priorities, according to the letter from CEO Mark Versey, which Aviva published on Monday.

“We acknowledge the magnitude of these challenges and will evaluate companies on the strength of their commitments and ability to demonstrate progress over time,” Versey wrote.

The CEO emphasised the importance of meeting the Global Biodiversity Framework’s 30×30 target and the role companies can play in achieving that.

“Delivery of these goals will be dependent upon government action through the robust design and implementation of national biodiversity strategies and action plans,” the letter said.

“However, companies have a critical role in engaging governments to establish supportive regulatory regimes that align subsidies and fiscal policies with the delivery of the Montreal targets.”

In the near term, Aviva said it expects all companies to “begin reporting within a reasonable timeframe” under the requirements to be set out later this year by the Taskforce on Nature-related Financial Disclosures (TNFD).

That would include mapping the relationship with nature for each of their individual assets, business processes, value chains, and downstream products, as well as identifying and quantifying nature-related impacts and dependencies.

As well, companies should assess the risks and opportunities following from the identified impacts and dependencies, according to Aviva.

Building on this, they should then move to develop a full biodiversity strategy.

“This should include the setting of short-, medium-, and long-term targets and action plans to reduce and reverse the impacts of the business on nature,” the letter said.

“Companies should then determine the scope and substance of financially relevant public disclosures to be made against the TNFD framework.”

Versey admitted that events like the pandemic and the Russian invasion in Ukraine are forcing many companies to rewrite their short-term strategies, but stressed that “it is imperative that tactical responses today do not undermine the delivery of critical longer-term sustainability objectives”.

“These potential conflicts could arise in various ways, including securing reliable energy sources by locking in high-carbon capacity or protecting profit margins by inadvertently damaging the long-term viability of supply chains,” the letter said.

“[T]here can be no wavering from our collective commitment to build a sustainable future, recognising the long-term success of companies is inextricably linked to a thriving planet and society.”

In December Aviva issued its first annual biodiversity report and called on the financial sector to play a bigger role in preventing biodiversity loss.

By Stian Reklev – stian@carbon-pulse.com

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