Companies as diverse as L’Oréal, Toyota, Bayer and Brasil Foods are to be targeted in an engagement initiative by investors as part of an effort to tackle financial risk stemming from biodiversity loss.

The engagement project, dubbed Spring and led by big-name investors, will focus not only on operational risk management, but also risks in supply chains and the potential for political engagement.

Biodiversity has become the latest objective for campaigners seeking to expand the environmental responsibilities of companies. Organisations such as the Taskforce on Nature-related Financial Disclosures (TNFD), the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI) have set their sights on companies improving the reporting of risk stemming from damage to nature.

The engagement campaign is coordinated by Principles for Responsible Investment (PRI) and will see high-profile investors, including CCLA, Nomura, Erste Asset Management and JGP, lead on engagement with an initial 40 companies around the world.

‘Material investment risks’

Dave Atkin, PRI’s chief executive, says: “Whichever way you look at it, nature risk is climate risk. What we’re seeing today from investors is a recognition of the importance of nature when managing material investment risks, including deforestation and biodiversity loss, when aligned with their individual fiduciary duty.”

According to Emine Isciel, head of climate and environment at Storebrand Asset Management: “Halting and reversing forest loss and land degradation is fundamental for a healthy climate, a sustainable future and long-term investment results.”

This week, the ISSB marked a year since the launch of its two sustainability reporting standards by launching a new work plan that includes research on how to integrate the nature-reporting recommendations produced by TNFD in September last year.

Efforts to have company reporting reflect the risk from depleted biodiversity and land have been under way for some time. Last year, Helle Bank Jørgensen, a pioneer in ESG education for boardrooms, wrote that nature is a “stakeholder” in corporate activity.

Nature as stakeholder

“If you are on a board, then you have a fiduciary legal responsibility to all the company’s stakeholders. And we live on one planet, based on one ecosystem. Therefore, nature has to be one of your key stakeholders around the decision-making table.”

Not every jurisdiction has found it easy to adapt to corporate responsibility for environmental issues. While the PRI plan initially focuses on big brands, the US has yet to introduce basic climate-risk reporting duties.

Efforts by US regulators have been suspended, while new reporting standards compiled by the Securities and Exchange Commission are challenged in the courts.

A challenge brought by the US Chamber of Commerce and the National Centre for Public Policy Research, among others, claims the new rules are “unlawful several times over”, violate the First Amendment of the US constitution, involve prohibitive costs, and “exceeds the SEC’s statutory and constitutional authority”.

Climate risk reporting has become well established in many parts of the world. UK companies report using Taskforce for Climate-related Financial Disclosures guidance and work is under way to approve use of ISSB sustainability standards. More than 20 jurisdictions around the world, representing 55% of global GDP, have done likewise. Adding nature reporting is a logical next step.