INTERVIEW with Maria Nazarova-Doyle, Head of Responsible Investments and Stewardship at Scottish Widows

| Scottish Widows has published a report‚ Nature and Biodiversity: The pensions imperative, providing helpful guidance and recommendations for the pensions industry.  Why is it important for pension schemes to integrate natural capital and biodiversity considerations into their investment strategy, process, and net zero emission goals?

Climate and environmental themes – and especially nature – should be a key consideration of asset allocation and decision-making for pension schemes. Given the diversity and size of their portfolios, pension funds hold considerable sway as asset owners and shareholders to promote positive corporate action on reversing nature degradation.  

Pursuing responsible investment practices isn’t just about doing the right thing – it’s about pragmatic portfolio management. As mentioned in our report, the impacts of human activity on climate and nature can amplify portfolio risks. Indeed, a recent report by the Intergovernmental Panel on Climate Change shone a spotlight on the risks that biodiversity loss presents to society and businesses, and therefore pension funds and their members.  

Overall, the pensions industry has undertaken some fantastic work to date in trying to tackle the environmental problems we collectively face as a society. There has been a recent wave of policy changes across the industry, such as refining stewardship approaches and the implementation of Task Force on Climate-related Financial Disclosures (TCFD) reporting.  

While it’s great to see industry peers mobilise on net zero, nature degradation also represents another huge crisis for our planet, and is deeply interlinked with the climate crisis – nature degradation exacerbates global warming while protecting and restoring it can be one of the key solutions to the climate disaster we are facing.  


| What developments are relevant for the pensions industry to be able to efficiently contribute to halting and reversing biodiversity loss? 

Our Nature and Biodiversity report outlines several policy and pension fund recommendations that will help create an ecosystem capable of encouraging nature-positive asset allocation throughout the financial services sector.  

The Taskforce on Nature-related Financial Disclosures (TNFD)’s reporting requirements are set to be published in September and expected to be widely implemented later this year. We urge the UK Government to leverage its timely opportunity to make the UK the first country to mandate economy-wide TNFD reporting, once the final framework is agreed upon


| How exactly can asset owners integrate natural capital and biodiversity into their investment process and make sure the real-world impact is aligned with the goals they have set?  

Asset owners should focus on building portfolios that specifically aim to protect natural capital and promote biodiversity. For example, in partnership with one of our asset managers at Schroders, we recently launched a new suite of sustainable funds comprising £1.4 billion worth of assets that invests in companies providing solutions to environmental issues.  

We also encourage other asset owners to promote responsible investment practices through the use of robust stewardship frameworks. At Scottish Widows, our activity is supported by our active approach to stewardship, which guides our decisions on how we invest, how we select fund managers, and how we challenge the companies we invest in.  This aims to safeguard long-term value for pension scheme members, supporting the creation of sustainable benefits for the economy, the environment and society.


| How does  Scottish Widowsengage with investment managers on nature-related issues and biodiversity loss, and what role does it play in your manager selection process? 

While we do delegate the bulk of engagement and voting activities to our investment managers, and we work closely with them to oversee their efforts in these areas. For example, we consistently monitor our main asset managers’ voting activities to ensure their approach to systemic issues like biodiversity loss and other major risks is aligned with our own Voting Guidelines and aims for the value of investments to be preserved over the longer term and, where possible, enhanced. Should material concerns arise, we can and do take action.  

New managers that we appoint must be UN Principles of Responsible Investment (PRI) signatories and signatories to the UK Stewardship Code 2020, with existing managers given until the end of 2024 at the very latest to become signatories to the Code, if applicable within their jurisdiction. Our tiered system, outlined in our stewardship report, separates our asset managers by varying levels of control we have over them, which impacts the type of stewardship activity we are able to carry out. Our core appointed managers, across Tier 1 and 2, are expected to already be signatories to the Code. This drives high standards of stewardship across a broad range of issues, including nature and biodiversity.



Without nature there is no business, there are no people and there is no GDP. We should remember that and not go down the rabbit hole of trying to figure out which part of our fragile ecosystem is more financially valuable, particularly since we don’t know where the tipping points are.  



| Do you consider addressing material risks related to biodiversity loss and nature degradation to be a fiduciary duty? How do you see the correlation between beneficiaries’ expectations, nature bankability, macro-economic, and global risks for humanity?  

Fiduciary duty needs to consider both financial risk and return – both of which can be significantly influenced by a variety of ESG factors. As a pensions and investments provider, while legally we do not have fiduciary duty across all our products, we are ultimately accountable to our customers and take our responsibility to safeguard their savings and investments extremely seriously.  

As a responsible investor, we take a long-term view and work to ensure our investments are consistent with a robust ESG framework, outlining a clear set out principles for our investment practices.  

We aim to support our customers’ long-term financial security, looking to protect their investments from material ESG-related risks and capitalising on the most important ESG-related opportunities. 


| One of the main concerns often expressed by asset owners is the measurability of nature-related risks and real-world impact. What is the approach of  Scottish Widows  in this regard?  

It is notoriously difficult to track biodiversity impact due to a lack of standardised metrics. Nonetheless, we expect companies to consider both their impacts and their dependencies on nature and report robustly using the upcoming TNFD framework. 

We recently unveiled a new set of climate-aware investment funds, including our Global Environmental Solutions Fund. To be considered for investment in this fund, we require firms to derive at least 50% of their revenues from goods and services that facilitate sustainable alternatives in transportation, electricity and heat production, water use, agriculture, or industrial manufacturing. Companies that direct at least 20% of capital expenditure to the adaptation of their businesses or products and services to the circular economy may also be eligible for investment.  


| Considering the controversial issues with carbon offsetting, how would you assess the role and potential of nature credits? What are the preconditions to make it an impactful solution?  

Crucially, buying offsets is essentially a way to invest in climate solutions that are otherwise not commercially viable and if structured well, they can be extremely beneficial to the environment. I share the same view with regards to nature credits.  

Given the funding gap for nature protection and restoration is $700bn pa, offsets have a big role to play to help plug that gap where they can provide an avenue to direct funding towards initiatives that cannot generate revenue in their own right. 

With regards to carbon, good-quality carbon offsets have to be incorporated into any sensible decarbonisation strategy – and ideally the earlier, the better. To achieve 1.5C degrees by 2050 we desperately need to both decarbonise as fast as possible and invest in climate solutions, now. It’s not one or the other – it’s both. 


| Whereas many argue that nature should not be monetized and put a price tag on, it is a common practice to assess the value of various ecosystem services and focus on nature bankability, would you agree that monetizing nature is important to incentivise and align capital flows with sustainability goals? 

I’m sympathetic to those arguments – but it’s important to acknowledge that nature is already implicitly monetized by our economic system, and the way in which natural resources have been impacted by the global financial sector to date.  

Acknowledging the monetary value nature represents can help translate environmental issues into a language that economic decision-makers easily understand. I’m a fan of Mark Carney’s 2021 book Values, for example, when he suggests assigning economic value to natural resources and ecosystem services so as to better incorporate them into our financial operations. 

Having said that, we need to do this because we operate in the system where this sort of monetary estimation makes sense. I have seen lots of research that attempts to put pound signs on various ecosystem services like pollination, and come up with varying but always big numbers. Our own report quotes that over 50% of global GDP is reliant on nature. But if we take a step back and think about it, surely that figure should be 100%!  

Without nature there is no business, there are no people and there is no GDP. We should remember that and not go down the rabbit hole of trying to figure out which part of our fragile ecosystem is more financially valuable, particularly since we don’t know where the tipping points are.  


| about

In her role as Head of Responsible Investments and Stewardship at Scottish Widows, Maria Nazarova-Doyle leads on incorporating responsible investment and active stewardship principles into the leading pension provider’s investment portfolio.

Maria is a LinkedIn Top Voice on responsible investment matters, a regular contributor to sustainable finance industry events and a professional awards judge. She is a member of the UKSIF Board and its Policy Committee, and volunteers in the ABI Climate Change and Stewardship Working Groups, the Occupational Pensions Stewardship Council and a number of government-led taskforces.


Report by Scottish Widows

Nature and Biodiversity: The pensions imperative


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