The Covid-19 crisis is pushing biodiversity higher up the ESG agenda and Natixis is the latest bank to introduce measures to safeguard natural capital across its business as the hunt for effective metrics starts in the run up to two key UN COP meetings next year.
The "concrete, measurable and time-bound" measures set by Natixis include eight targets to reduce the impact of its corporate and investment banking, asset management, and insurance businesses on the natural world, and the bank will include biodiversity in its next strategic plan in 2021.
Natixis has been working for two years on its biodiversity commitment, which has gained urgency this year as the Covid-19 crisis reinforced the link between habitat loss and human health.
"Our first commitment is to include biodiversity in the next plan,” said Karen Degouve, Natixis’ head of sustainable business development. "I'm not sure the subject would be so material across our strategic plan without the events of the last few months."
INCREASED FOCUS
Fiona Reynolds, CEO of the UN’s Principles for Responsible Investment, sees an increased focus on biodiversity and issues such as deforestation and water usage from PRI signatories ahead of the delayed UN COP meetings for climate change in the UK and biodiversity in China. Both take place next year.
“[The meetings] will have a strong focus on biodiversity and I think it’s about time we had a greater push on these issues,” she said.
Measuring biodiversity remains challenging as a widely-implemented metric – the equivalent of CO2 tonnes for climate change issues – has yet to be established for nature disclosure and reporting, although work is progressing on identifying targets, such as the number of living species per square kilometre.
"Once we have a market-wide metric in the same way that a tonne of CO2 is used for measuring climate impact, then this will probably be an issue that is picked up by the financial sector at large as you can measure the biodiversity impact per euro of lending,” Degouve said.
ALL TALK ...
None of the world’s 75 largest asset managers, which currently manage assets equivalent to more than half of the world’s GDP, currently have a dedicated policy on biodiversity, according to a report by responsible investment organisation ShareAction, which remains critical of the lack of action.
“It’s good on the whole that [Natixis] are starting to look at this, but it’s very much the start of things without an overwhelming sense of urgency. This still makes them one of the more progressive financial groups on biodiversity,” said Krystyna Springer, an analyst at ShareAction.
Natixis will work with five investment management affiliates with €305bn of assets under management on its biodiversity pledges – Mirova, Thematics, AEW Europe, DNCA and Ostrum AM – and expects the number to grow.
Biodiversity considerations will be applied to all of Natixis' financing decisions in sectors relating to land use, including mining and metals, fossil fuels, power generation, water management, real estate, transport and agricultural commodities.
"For the sectors for which biodiversity is material, it will be considered on all underwriting,” Degouve said.
This will be done using the bank’s Green Weighting Factor, which colour-codes financing activities and assesses their impact on the bank’s balance sheet.
It will apply to 50% of new transactions by the end of this year and 100% by the end of 2021, and Natixis is hoping to be able to evaluate all sectors by 2023.
The Green Weighting Factor is proving to be a flexible tool and could be adapted to include water pollution, waste and social considerations in future, Natixis said.