Investors should adopt a specific strategy when investing near areas with protected biodiversity, charity ShareAction and the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) said in a report published on Tuesday.

The report outlines practical steps for investors to integrate protected areas into their environmental and social risk management frameworks, set clear expectations for investee companies, and implement effective escalation strategies if their expectations are not met.

“We know investors are not doing enough to adapt their investment policies to tackle the destruction of important ecosystems in protected areas,” said Alexandra Pinzon, head of biodiversity at ShareAction in a statement.

“To address the global extinction crisis and unprecedented decline of nature, investors must recognise the vital role of protected areas as a tool for biodiversity conservation, and strengthen their investment policies and engagement with companies accordingly,” said Pinzon.

Such actions will benefit investors by reducing the risks of stranded assets, reputational harm, and financial damage, she said.

DUE DILIGENCE

Before investing in protected areas, it is crucial for investors to conduct thorough due diligence to identify and manage any potential risks, the report said.

Key factors to consider include:

• Understanding the conservation target of the project, along with relevant metrics, and how these align with the local management plan for the protected area
• Engaging Indigenous Peoples and local communities during project development and implementation, securing free, prior, and informed consent
• Evaluating risks from regulatory changes, climate impacts, or social challenges that could lead to delays or stranded assets

Protected areas come in many forms, the report said. They can be designated at national, regional, and international levels, with usage ranging from strict protection to allowing sustainable use and tourism.

These include those listed by the World Database on Protected Areas, and those in the categories defined by the International Union for Conservation of Nature, it said.

Other important zones such as Key Biodiversity Areas, Other Effective area-based Conservation Measures, and territories conserved by Indigenous Peoples and local communities are touched on in the report but need further guidance, it said.

ShareAction’s benchmarking of asset managers and insurers, in reports published in February 2023 and April 2024 respectively, highlighted a general lack of clear policies for managing risks linked to protected areas.

“Asset managers and asset owners can drive positive impacts for nature through their investment decisions,” said Neville Ash, director of UNEP-WCMC.

“As we move towards COP16, this is a valuable step toward the whole-of-society action that the Kunming-Montreal Global Biodiversity Framework calls for.”

Engaging with companies to assess their exposure to protected areas, and collect relevant location data, is a crucial part of this effort to reduce risks, he said.

By Thomas Cox – t.cox@carbon-pulse.com

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