Many businesses are using natural capital to deliver their products and are therefore dependent on nature’s sustainable maintenance. Despite this obvious reality, biodiversity loss is at unprecedented levels.
The Kunming Montreal Global Biodiversity Framework (2022, adopted by 188 countries) set the scene for the global commitment to action on halting this trend, and restoring nature. At EQ, we aim to align to internationally agreed frameworks, like the Montreal protocol, as these are what shape risks and opportunities for businesses and investments going forward.
In our sustainability outlook for 2024, we listed a few government regulations that will come into effect this year, which will create tailwinds for sustainable businesses. One of these is the European Union’s Regulation on deforestation-free products (EUDR), which requires companies using the likes of timber, coffee or paper pulp to conduct greater due diligence and prove deforestation-free supply chains. If not, companies risk fines and bans on sales into Europe. This regulation is one of the first of many, which will create a potential cost and thus a financial risk from biodiversity destruction. Investing in more forward thinking, responsibly managed businesses across our EQ portfolios comes at a clear advantage here.
We also recognise the role that we as investors can play to halt and reverse forest loss and land degradation as a key driver of biodiversity loss, including through investor stewardship. To really protect against risks from biodiversity loss in investments, we need better data, more experts, and greater investor attention. Last year, we started mapping all underlying investments to different nature impacts, driving our engagement with fund managers that held companies in priority sectors like agriculture, mining or utilities. This year we take this one step further by joining Spring, a UN PRI-convened investor collaboration that will see EQ engaging with target companies. By helping many investors coming together to put pressure on companies, the initiative sets consistent expectations on business biodiversity policy & targets, supply chain management, and their political engagement (including lobbying). In addition, EQ is attending selected company AGMs in 2024 to further the biodiversity agenda.
We look forward to reporting on progress and learnings as the engagements continue.
