Climate lessons help investors tackle biodiversity loss

Biodiversity loss will wipe up to A$27 billion from the Australian economy annually by 2050 based on current estimates. It presents a material financial risk to investors and companies unless they seize opportunities to protect Australia’s natural systems.

A new report commissioned by the Australian Council of Superannuation Investors (ACSI), Biodiversity: unlocking natural capital value for Australian Investors, sets out how biodiversity loss presents physical, transition and systemic risks to businesses.

The report, authored by EY Australia, summarises critical biodiversity related financial risks for investors, emerging tools and frameworks for investment analysis, current industry and company disclosures and sets out a five-point investor action plan for tackling biodiversity.

“Loss of biodiversity, the living component of natural capital, not only erodes economic, social and cultural value, but presents a material financial risk for investors,” ACSI CEO Louise Davidson said. “It can disrupt the availability of raw materials, the flow of supply chains, the ability to develop greenfield projects and the growth of sectors such as tourism when biodiversity systems collapse.

“Biodiversity risk should be tackled with the same level of urgency, ambition and momentum as climate change,” Ms Davidson said. “Biodiversity loss is accelerating, and this creates material risks and opportunities for investors based on companies’ dependencies and impacts on biodiversity.”

More than half the world’s economic output – estimated at US$44 trillion (A$60 trillion) – is dependent on nature, and an estimated 60 per cent of animal populations, including mammals, birds, fish, reptiles and amphibians have declined over the past 40 years. Food, infrastructure, transport, agriculture, property, energy and fashion industry value chains account for much of the global biodiversity loss, with primary industries such as forestry, fishing and agriculture the worst affected.

Valuing natural capital, which includes soils, water, oceans, biodiversity and landscapes, is a crucial step to assessing associated investment risks. While mechanisms for market valuation, metrics and scenario testing are less developed for biodiversity than they are for climate, they are expected to progress rapidly.

“Australian investors do not need to wait for this to begin the work to understand and manage biodiversity loss related risks” Ms Davidson said.

Key findings and insights from the report include:

• Tools and frameworks for investor consideration of biodiversity are rapidly emerging, with the expected release of the Taskforce for Nature related Financial Disclosures (TNFD) in 2023;
• Investors will increasingly need to consider biodiversity risk alongside climate risk in future-proofing their portfolios. Australian investors should act now to understand and manage biodiversity related risks and opportunities;
• Based on the analysis conducted, Australian companies have not yet assessed the full magnitude of their biodiversity risks and opportunities, despite their prevalence throughout the economy. Australian companies will increasingly be expected to be able to articulate their impacts and dependencies on biodiversity.


To understand these risks, the report recommends Australian investors:
Plan and educate: Develop a clear plan for managing biodiversity related financial risks and opportunities, including setting targets. Build the capability and competence of the organisation, including by starting to align with the TNFD framework.
Undertake corporate engagement: Begin targeted engagement with companies to understand the current state of biodiversity risk and opportunity management in portfolios and across asset classes.
Manage portfolio risks and opportunities: Identify, assess and manage material financial risks and opportunities associated with biodiversity. Start by undertaking a portfolio-level assessment to identify risk and opportunity across asset classes and consider appropriate investment actions.
• Shape policy and framework development: Understand, and consider actively supporting, the development of the TNFD and the Finance for Biodiversity Pledge. Consider supporting the implementation of the Samuel Review to improve the management of biodiversity domestically.
Monitor and disclose targets: Monitor company performance, and track and disclose performance against targets relating to biodiversity.

For additional information please contact:
Annie Lawson
Manager, media and communications
P: 0409 869 986 E: alawson@acsi.org.au

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