PERSONALITY IN PENSIONS
INSIGHT by Lee Backhouse, Senior Responsible Investment Manager; Nature and Biodiversity Lead at Scottish Widows
How can pensions operationalize ‘transformative change’ in the context of ‘nature positive?’ With a current lack of clear definitions and rules to standardise delivery, it’s tough to untangle. Let’s take a look.
The term ‘nature positive’ has emerged as an imperative global goal for society. Promoted at the international level by the Kunming-Montreal Global Biodiversity Framework (KMGBF), it offers a rallying call for many and a new common currency. But beyond that, it’s often a source of confusion. Furthermore, to achieve it, there are scientifically backed calls for urgent ‘transformative change’ in how the corporate world interacts with nature and biodiversity.
Great frameworks from the EU Business and Biodiversity Platform and The Biodiversity Consultancy Ltd – in collaboration with the University of Oxford and the WBCSD – World Business Council for Sustainable Development – separately offer practical understanding to bring clarity on the ‘what’ and ‘how’ of transformative, nature positive action.
The EU Business and Biodiversity Platform notes that absence of a level playing field in interpretation, operationalisation, and delivery of nature positive creates risks of greenwashing. Not only does greenwashing cause harm to customers and undermine global goals, but it paralyses innovation and quashes ambition. To bring parity on the playing field, the platform provides a working definition of nature positive in a business context – 10 principles are presented to help companies more clearly define and implement nature positive strategies.
The Biodiversity Consultancy emphasises lack of clarity, which places most corporate biodiversity commitments short of transformative improvements that are consistent with nature positive ambition. In their own context, companies need to understand what transformative changes are necessary, how to make them and how to identify synergies with real-world nature positive outcomes. The framework focuses on two major yet conflicting risks: greenwashing and leakage, which together create a trade-off between integrity and ambition. It defines transformative change through interpretation of the different classes and scale of action that can justifiably be categorised as ‘transformative’ and provides recommendations on the structuring and prioritisation of actions to promote integrity and innovation.
Note: leakage refers to the risk wherein a single company’s direct and tangible positive actions at the individual level do not lead to overall improvement in biodiversity, typically due to a lack of collaboration to deliver change at scale.
Both frameworks make use of core principles through which core ambitions align: guard against greenwashing and leakage while supporting action across the business world that is commensurate with the goals of the KMGBF.
Our industry can be ambitious while delivering for both beneficiaries and nature. Consideration of these practical frameworks offers an excellent starting point.
Outlined below are my thoughts on some key considerations according to the two synergistic frameworks:
〉Achievement of nature positive is a collective effort. The frameworks emphasise that individual companies cannot claim to be nature positive, but through credible action can claim to contribute to the global nature positive goal. It’s essential we all pull as one and communicate appropriately.
〉Nature is more than biodiversity. Nature means all systems and phenomena of the physical world, including land, freshwater, oceans and the atmosphere. The Planetary Boundary model presents nine deeply interlinked and interdependent processes – biosphere integrity alongside eight others – which regulate the stability and resilience of the Earth. Failure in one can lead to failure in others, just as success in one can lead to success in others. I occasionally hear “climate and nature” – climate is nature.
〉Nature positive includes social justice. Efforts to regenerate nature must include seeking improved outcomes for all. Many vulnerable communities across the globe – who are often the stewards of nature – feel the effects of nature loss and inequitable solutions much more acutely. Actions aligned with the KMGBF and UN Sustainable Development Goals, hearing all voices, will help these communities share in the benefits of nature-based solutions in a just transition.
〉Mainstreaming of strategies is critical. Nature must be fully embedded across the whole organisation via governance, strategy and risk management. Leverage learnings from work on climate when considering how best to adopt a holistic approach to environmental risks and opportunities.
〉Mitigation hierarchy is key but not enough. Strict sequential application of this should be central to any strategy – avoid, reduce, restore, compensate. However, this alone only achieves ‘no net loss’ and simply helps to halt further decline. It does not address historic, indirect and diffuse impacts from value and investment chains. Heightened ambition means proportional positive contributions – think ‘conservation hierarchy.’
〉Better define transformative change. Changes within operations and portfolios sure can help halt and reverse biodiversity loss, but neither BAU nor incremental steps are transformative enough to support achievement of nature positive. ‘Transformative change’ transcends multiple levels of society, involving the micro-level changes executed across operations and portfolios, macro-level changes across social networks and structures and interactions between the two. It is only through synergistic interactions between all levels that true transformation can emerge.
〉Boldly support ambitious transformative change. The required scale of change cannot be understated. Business mindsets, actions, norms, and structures must take huge strides – deeply, intentionally, and swiftly. Three components offer direction, for which all actions should support societal goals and be underpinned by a logical theory of change. Implementation must be carefully and effectively monitored to ensure desired real-world results.
1. Individual actions: operational and portfolio level nature positive and biodiversity strategies should create ripples that spread outwards to address structural problems. As we have understood from portfolio decarbonisation plans, insular focus brings no read-world benefit.
2. Social signalling actions: goals and progress should be fully transparent, as should impacts and dependencies, and our industry should continue to be public with additional pledges. See Taskforce on Nature-related Financial Disclosures (TNFD) for your approach to disclosure. Such public positioning spreads social norms and practices that are aligned with societal goals.
3. System changing actions: let’s continue advocating for ambitious policies and regulation that create supportive conditions for our industry and which drive transition of businesses away from harmful operations across their value chains. This advocacy drives broader system change, influencing individual behaviours.
〉Use targets and metrics effectively. Strategies should be underpinned by a comprehensive action plan with clear targets. Targets should follow prevailing science – the Science Based Targets Network has published initial methods, tools and guidance to help assess and prioritise environmental impacts and prepare to set targets for freshwater and land in support of biodiversity. Alignment with this network – and future compliance with TNFD – will support development, application and monitoring of targets and instil confidence that targets, actions and metrics address and integrate the necessary components of nature. An indicator of good practice could be the identification of synergies in investment opportunities whereby multiple environmental benefits can be measured and delivered. An example? Investment in peatland restoration which is beneficial for carbon, water, biodiversity, and – by consequence – society.
To conclude: actions towards transformative change can be defined and operationalised, are feasible and measurable and a necessary part of the journey towards a nature positive future. The framework from the Biodiversity Consultancy notes that progressive companies CAN and DO implement social signalling and transformative actions at multiple scales to drive actual change.
See both frameworks here and here.
Also see:
〉Nature and Biodiversity: The Pensions Imperative by Scottish Widows
〉The Guide to Action on Nature by the Association of British Insurers
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| about
Lee is part of the Responsible Investment and Stewardship team at one of the UK’s leading pension providers Scottish Widows, where he leads the work on nature and biodiversity, with a focus onbiodiversity impact assessment, the growth of carbon and nature markets and TNFD. He authored Scottish Widows’ report on nature and biodiversity for the pensions industry and is an active contributor to several nature-focused industry initiatives, advocating for industry-wide action. With a background in investment risk and compliance, Lee is a team SME on matters of sustainable finance policy and regulation.
Founded in 1815, Scottish Widows is part of Lloyds Banking Group, the UK’s largest digital bank and financial services group. With nearly £170bn assets under administration and 6 million customers, Scottish Widows’ award‐winning product range includes workplace and individual pensions, annuities, life cover, critical illness, income protection as well as savings and investment products. Customers can access our products and services through independent financial advisers, directly, and through all Lloyds Bank, Bank of Scotland and Halifax branches.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
