“Financial materiality” is forcing asset owners, including pension funds, to incorporate nature and biodiversity into their sustainability strategies, according to a report by Pensions for Purpose.

The report found that 65 per cent of asset owners are now incorporating nature and biodiversity into their sustainability strategies, while a further 20 per cent already plan to do so.

Commissioned by the First Sentier MUFG Sustainable Investment Institute, the research highlighted the pressing need for the financial sector to confront biodiversity risks, with asset owners increasingly aware of the dangers of biodiversity loss.

Pensions for Purpose research manager, Bruna Bauer, claimed it was financial materiality, rather than regulatory pressure, that has emerged as the primary reason for asset owners to act.

“Biodiversity loss poses tangible risks to investments, including supply chain vulnerabilities and ecosystem fragility, prompting schemes to proactively protect their portfolios,” she explained.

“Asset owner respondents have realised ignoring nature-related risks is not just a sustainability issue but has financial consequences too, leading to the integration of nature into sustainable strategies before more regulation mandates it.”

Despite progress, the report found that asset owners still face considerable challenges in reporting nature-related risks, not due to data availability but data variety and interpretation.

Unlike climate metrics, such as carbon emissions, which are more straightforward, biodiversity assessments demand a nuanced approach, blending qualitative and quantitative insights.

It also found that many asset owners are still building internal capacity, exploring suitable metrics and forging partnerships with academic institutions and non-government organisations to navigate these complexities.

Commenting on the lack of resources, Pensions for Purpose chair and founder, Karen Shackleton, said the report served as a “wake-up call” for the investment industry to address biodiversity loss proactively.

“With the Taskforce on Nature-related financial disclosure (TNFD) framework gaining momentum, asset owners must leverage existing climate efforts and structures to build comprehensive strategies for biodiversity.”

The report also emphasised the connection between nature and climate within sustainability strategies.

Asset owners increasingly view nature-based solutions as vital for carbon sequestration and climate resilience. However, most funds still lack dedicated governance structures for nature, with biodiversity often embedded within broader ESG policies focused primarily on climate.

To address this gap, many schemes are expanding teams or relying on external expertise to inform trustee decision-making.

Bauer added: “COP16 underscored the urgency of this mission, highlighting the critical need to protect 30 per cent of the world’s ecosystems by 2030. Current efforts fall far short, with developing nations, which host most of the global biodiversity, advocating for increased international financial support.

“Asset owners have a unique opportunity to align their strategies with global sustainability goals, ensuring portfolio resilience and ecological preservation.”

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