embracing the power of investment to protect nature

The depletion of Earth's rich biodiversity, including plants, animals, microorganisms, and their ecosystems, is occurring at an alarming rate.

According to a UN Global Land Outlook assessment, more than 1 million species are now threatened with extinction, and as much as 40% of Earth's land surfaces are considered degraded.¹

Nature and biodiversity loss is not only a threat to the environment and the communities that depend on it but also presents a significant financial risk to companies, shareholders, and the global economy.

Natural capital is vital for the economy, with more than 50% of the global GDP being highly or moderately reliant on nature.

Investors worldwide are increasingly recognising the urgent need to address the loss of natural capital as a systemic risk for their investment portfolios.

Understanding the risk

The Taskforce on Nature-related Financial Disclosures (TNFD) has taken a meaningful step forward in creating a market-led risk management framework aligned with global disclosure standards. The framework will play a pivotal role in shaping how organisations report and act on evolving nature-related risks and opportunities and help to chart a course towards halting and reversing nature and biodiversity loss.

HESTA welcomes the launch of the TNFD framework, recognising its potential to effectively identify and address nature-related risks. By considering the information framed through the TNFD in our investment decision-making, we can identify the material nature-related risks and opportunities associated with a company’s operations and supply chains.

Find out more on the TNFD website. 

The role of investors

At HESTA, we firmly believe that investors have a crucial role in safeguarding the planet's biodiversity and ensuring the long-term performance of our portfolio and the retirement savings of our 1 million+ members.

That’s why we’re proud to be one of the first Australian super funds to join Nature Action 100, a global investor-led initiative focused on driving greater corporate ambition and action to reduce nature and biodiversity loss. Investors participating in the initiative engage companies in key sectors that are deemed to be systemically important in halting and reversing nature and biodiversity loss by 2030. Visit www.natureaction100.org to find out more. 

HESTA has completed an assessment of material nature-related risks and opportunities impacting our investment portfolio and developed a roadmap to inform our active ownership priorities with key sectors and portfolio companies, as we seek to protect and enhance the value of our member's investments and halt further biodiversity loss.

However, if asset owners like HESTA are to achieve their nature and biodiversity-related objectives, portfolio companies must also undertake assessments of nature-related impacts and dependencies throughout their supply chains and develop appropriate responses. 

With many companies grappling with where to begin their nature-related assessments, the founding members of the TNFD have developed ‘LEAP’.

LEAP provides that guidance to companies and is designed to help them develop approaches that effectively respond to their operations' material nature-related risks and opportunities.

With the availability of resources like LEAP, we will engage with portfolio companies to ensure they take the necessary action to understand their nature-based impacts and dependencies and develop loss management practices. 

The connection to climate change and community

As companies begin to develop strategies that seek to halt and reverse nature and biodiversity loss, it is paramount that they consider the intersection with other systemic risks that are amplified by nature loss.

Nature helps mitigate against and adapt to the worst effects of climate change², and like climate change, nature and biodiversity loss can potentially impact known modern slavery risks, including displacement of people, scarcity of resources, and supply chain disruption.³

With the global focus on legislating mandatory sustainability and climate-related disclosures, we encourage Boards to address nature and biodiversity with the same urgency as they have shown toward climate-related disclosures.

Let us embrace this responsibility collectively and help shape a future where nature and finance can thrive together.

¹ https://www.unccd.int/resources/publications/land-degradation-neutrality-biodiversity-conservation-briefing-note

² https://www.unep.org/news-and-stories/story/why-nature-holds-key-meeting-climate-goals

³ Decker, Sparks, Boyd, Jackson, Ives, & Bales, Growing evidence of the interconnections between modern slavery, environmental degradation, and climate change, One Earth (4) 2, 2021, 181-191.