The Finance for Biodiversity Foundation (FfB) launched the second edition of its nature target-setting framework for asset managers and owners on Wednesday with three target types.
The document includes guidance on ‘monitoring’ and ‘portfolio’ targets, in addition to the ‘initiation’ ones introduced in its first edition published last year.
FfB launched the framework in collaboration with the Science Based Targets Network and UN Environment Programme Finance Initiative, alongside backing from investors such as Fidelity International, Robeco, and HSBC Asset Management.
The update enhances the original framework with new elements to help financial institutions align their investments with nature targets, including priority sectors, FfB said.
“As the framework underlines, not only governments, but all actors of society, should contribute to this collective mission” of tackling biodiversity loss, said David Cooper, acting executive secretary of the secretariat of the Convention on Biological Diversity in the foreword.
The 177 signatories of the FfB pledge, with over €22 trillion (€24 trln) in assets, have committed to setting targets by 2024, or within two years of signing depending on when they joined.
“Fidelity International welcomes this guidance as a means to inform the natural evolution of our existing work in this space,” said Charlotte Apps, sustainable investing analyst at Fidelity International.
Although SBTN has published target guidance for corporations on nature, it has not done so for financial institutions.
MONITORING AND PORTFOLIO TARGETS
The portfolio target is the final step in formalising ambitions to reduce the potential negative impacts across portfolios, FfB said. However, the proposals only cover asset classes of listed equity and corporate bonds.
“They involve establishing thresholds to reach on the previously monitored key performance indicators, which then become portfolio sub-targets, and defining a clear action plan to achieve these through stewardship sub-targets.”
The five-step process concludes with how to publicly disclose the monitoring target, including the start and end date, indicators, and impact drivers.
The monitoring target is an optional way for investors to track their portfolio and prepare their stewardship strategy, with five steps similar to the portfolio target.
FfB recommended setting the three types of targets over time, rather than all at once, to ensure that all targets are set to be achieved by 2030, in alignment with the Global Biodiversity Framework. This marked a change from the first version.
Other key updates in the latest version included the identification of three key impact drivers on nature for 10 priority sectors: land use change, volume of water use, and emissions of toxic soil and water pollution.
The 10 priority sectors are:
- Automobiles
- Beverages
- Chemicals
- Consumer staples distribution & retail
- Electric utilities
- Food products
- Metals & mining
- Oil, gas & consumable fuels
- Paper & forest products
- Pharmaceuticals
By Thomas Cox – t.cox@carbon-pulse.com
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