Biodiversity and natural capital: investor influence on company reporting and performance
Journal of Sustainable Finance and Investment , Volume 8 - Issue 2 p. 158- 184
This paper presents the results of a multidisciplinary qualitative study concerning the influence of investors on the performance and dependencies of companies in relation to biodiversity and natural capital (BNC). For BNC, we employ four indicators: land use, water use, chemical pollution and carbon emissions. The study assesses: (i) in which way asset managers and fund managers exert influence on the efforts of companies to reduce their negative environmental impact and to improve their positive environmental impact; (ii) how this influence is perceived by the companies; and (iii) to what extent legislation requiring reporting on non-financial performance criteria supports the parties in their engagement and communication. Interviews were conducted with multiple investors and companies to assess in a detailed way the interaction between these parties. Key findings include that BNC is considered material by half of all interviewed investors, that they employ available legal options in their engagement strategies, and that they use the information disclosed by investee companies pursuant to mandatory reporting law. However, company respondents indicate that investors are only interested in BNC when it is clearly and directly linked to (reduced) financial risks. These respondents stated that BNC performance as well as transparency strategies do not have any material influence on investors. Another central issue flagged by respondents is the lack of comparable and standardised information regarding BNC themes such as corporate water use, land use and chemicals. Common methodologies and standards to tackle these issues are still missing. Based on our findings, it can be concluded that tangible strategies for successfully tackling BNC issues are absent. The approaches developed so far are not clearly enough linked to (financial) risks and opportunities in the past, present or future. The perceived effect of EU Directive 2014/95 on tackling BNC issues is also low and environmental profit & loss accounts are unable to clarify the financial relevance of BNC. Establishment of a clear nexus between BNC and financial risks and opportunities is a necessary precondition to advance BNC in future.
|ESG, Institutional investors, investor engagement, methodologies on biodiversity and natural capital reporting, transparency|
|ERIM Top-Core Articles|
|Journal of Sustainable Finance and Investment|
Lambooy, T.E. (T. E.), Maas, K.E.H, van ‘t Foort, S. (S.), & van Tilburg, R. (R.). (2018). Biodiversity and natural capital: investor influence on company reporting and performance. Journal of Sustainable Finance and Investment, 8(2), 158–184. doi:10.1080/20430795.2017.1409524