Pension funds failed to support nature restoration

A new report, which was released today, reveals that while awareness of biodiversity risks among UK pension funds is growing, around 62% are not invested in natural capital assets.

The research, that was developed by Pensions for Purpose and commissioned by Gresham House, highlights the opportunity for asset owners and managers to enable more resilient portfolios and bolster biodiversity by integrating nature preservation and restoration into their investment strategies.

Following this, Pensions for Purpose, a small-knit group of experienced investment and marketing experts, found 38% of the people they interviewed have invested in natural capital solutions. As a result, the company is calling on asset owners and managers to start investing to preserve and enhance natural capital – the world’s stocks of natural assets which include geology, soil, air, water and all living things.

The research was inspired after it was revealed that biodiversity loss, an existential threat to humanity, has led to an average 69% drop in wildlife populations since 1970.

Karen Shackleton, Chair and Founder of Pension for Purpose said: ‘The investments of the past based on natural capital exploitation are no longer viable: the cost of depleting our resources has become too high, both environmentally and financially. Investors must therefore seek sustainable alternatives that preserve and enhance our planet’s natural capital.  

‘Addressing biodiversity loss is essential for preserving ecosystems and is a smart investment decision, enabling more resilient portfolios amid growing public awareness and future regulation.’

With the World Economic Forum (WEF) forecasting that $2.7 trillion is needed annually until 2030 to scale the transition of socio-economic systems to address nature crisis, natural capital is vital.

Currently, 35-54% of financial institutions’ assets are highly or very highly dependent on ecosystem services supported by biodiversity, according to the Sustainable Policy Institute. Despite this, 80% of asset owners interviewed for the report do not view biodiversity risks separately from climate risks, due to limited resources available to focus on biodiversity loss as they do for climate change.

The research also highlights a divide among pension funds when it comes to their responsibility to invest in natural capital. While 38% believe it falls within their remit, an equal percentage believe it does not, with the remaining respondents undecided.

Some funds focus on the responsibility and role of their own investment portfolio, while others adopt a more active stance, considering the future of investment and the wider implications of securing a better world for their members’ retirement.

Heather Fleming, Managing Director of Institutional Business at Gresham House said, ‘Investments that avoid or reduce biodiversity loss and the depletion of global natural capital will be central to investment portfolios of the future, as investors realise the opportunity and the financial imperative to reverse nature loss.  

‘Nature has been treated as a free economic good for too long. With the WEF suggesting a nature positive transition could generate $10 trillion annually and 395 million new jobs, building nature back better can drive attractive financial returns and planetary impact.’

Image: Robert Lukeman