Why engaging with companies on biodiversity matters more than ever

Human life and economic prosperity are dependent on the benefits provided by nature. Biodiversity loss puts the ecosystems upon which societies depend, as well as the global economy, at risk. Biodiversity loss also exacerbates global warming, meaning that preserving nature and biodiversity is a must for investors aiming to address climate change as the two threats are inextricably linked.

At AXA IM, we believe investors should robustly integrate nature and biodiversity considerations into their research, investment processes, and engagement activities. Engaging with companies can contribute to raising awareness, knowledge sharing and advancing broader biodiversity goals, such as those set out in the 2015 Paris Agreement²  and in the United Nations’ Sustainable Development Goals (SDGs)³ .

Our own approach incorporates available biodiversity-specific data to help prioritise and inform our engagement activities.

Stronger foundations

Since the Global Biodiversity Framework - a landmark agreement to halt and reverse nature loss by 2030 - was adopted in 2022, there have been several important developments which will no doubt help shape the private sector’s actions to come⁴ .

Two key international standards were issued in 2023. The Science Based Targets Network (SBTN) outlined target-setting guidance which companies began pilot testing⁵ . In addition, the Taskforce on Nature-related Financial Disclosures⁶  (TNFD) published a highly anticipated framework outlining a set of disclosure recommendations and guidance for assessing, reporting and acting on nature-related dependencies, impacts, risks and opportunities.

The landscape of biodiversity integration is an evolving one, and both companies and investors are still at the early stages. New data, metrics, and methodologies are currently being tested and developed by various market actors.

As recently as 2023, responses to the CDP environmental non-profit organisation’s Climate Questionnaire biodiversity section highlighted that biodiversity integration – particularly assessments and indicators – was still in its nascency, although many companies were willing to consider advancing on this topic and some had already begun working on this complex and relatively new topic.

To help galvanise greater momentum among corporates, Nature Action 100 (NA100)⁷  was officially launched in September 2023 - AXA IM was part of its Launching Investor Group and we are a member of its Steering Group. This initiative seeks to engage companies in key sectors deemed to be systemically important in reversing nature and biodiversity loss by 2030.

Our engagement goals and activity

Our engagement strategy around this complex and fledgling theme has been to start aligning our greatest efforts in such a way which incorporates established knowledge but also emerging topics on negative impacts and the sectors which matter most for biodiversity and nature, for example the food and chemicals industries.

Our biodiversity related engagements initially focused on deforestation, as an extension of our Ecosystem Protection and Deforestation policy,⁸  and continue today with a selection of companies involved in the supply chain of agriculture and/or forestry products, more specifically the value chain of key raw materials associated with deforestation and ecosystem conversion (soy, palm oil, cattle, and timber).

We focused on those with a material impact on deforestation and natural ecosystems conversion, and those we view as needing to make greater progress in managing existing risks and impacts. We published an update of this policy in 2023 to include details on our engagement approach including our process and general expectations. As a result of the programmes and profiles of companies we engaged, many engagements we carried out in 2023 touched upon biodiversity pressures related to land use, which includes the theme of deforestation.

In addition to deforestation, we have broadened out, since 2022, to other dimensions such as pollution, plastic and waste, as well as to the specific pressures identified by using the Corporate Biodiversity Footprint (CBF), a biodiversity footprinting dataset from Iceberg Data Lab, a specialist biodiversity data provider⁹ . This innovative, albeit still evolving, biodiversity-specific data helps us select and prioritise sectors and companies which present a significant biodiversity footprint.

Given the market’s nascent state, the aim of our engagements has principally been to help companies as they seek to develop robust and effective biodiversity approaches. These represent opportunities to share industry best practices with companies as they set up action plans, and to ensure these are coherent with available knowledge on outcomes, including biodiversity footprint reduction.

The ultimate goal is for companies to integrate nature-related risks and shift their business models to more nature-friendly and nature-positive activities. This means mitigating and reducing biodiversity risks as a priority – including from upstream and downstream activities – and supporting a ‘nature-positive’ transformation.

Given that biodiversity stands out as both a more complex and less mature issue than climate change, we believe that putting the TNFD to work with some pilot analysis such as those we carried out in the agrifood and automobile sectors¹⁰  is instrumental to understand and assess the impacts on nature of investments, as well as related dependencies and risks. Addressing them and identifying opportunities that can contribute to the preservation and restoration of nature should also simultaneously contribute to better financial performance and economic outcomes.

Below are two case studies highlighting some of our biodiversity-related engagements. 

Case study: BHP

We began engaging with metals and mining group BHP on biodiversity in 2022. At the time, our objective was to understand BHP’s overall readiness to act on what was then an emerging and complex topic. With growing momentum around biodiversity following the adoption of the Global Biodiversity Framework, our primary engagement objective shifted toward encouraging BHP to establish a robust biodiversity and nature protection strategy.

We were part of the investor group that launched the NA100 collective engagement initiative, aimed at driving corporate action on nature across six investor expectations: ambition, assessment, targets, implementation, governance, and engagement. NA100 identified BHP as a target company due to its role in the metals and mining sector, a key area for reversing nature and biodiversity loss by 2030. Consequently, we transitioned to a collective engagement approach, acting as co-leads.

Our priorities included understanding how BHP's nature-related targets align with its internal assessments, examining governance structures, exploring public policy engagement, and assessing the company’s willingness to align with external standards. When we met with BHP in 2024, it highlighted its focus on identifying site-level biodiversity indicators and its pilot of the TNFD LEAP approach, which we view as a positive development¹¹ . The company was receptive to our feedback on enhancing disclosure practices and developing nature advocacy activities.

We found this initial engagement both productive and insightful, laying a strong foundation for constructive dialogue on nature and biodiversity. As a follow-up, we will provide recommendations on enhanced disclosure for full-year 2024 reporting, as requested by BHP, and will continue the dialogue to support its progress on nature-related initiatives.

Case study: Vinci

We began engaging with French construction company Vinci in 2022 as part of our biodiversity footprint-guided engagement programme. The primary objective was to encourage the company to update and implement a biodiversity strategy that aligns with its key biodiversity impacts.

After sharing the results of our biodiversity footprint assessment, we engaged in an in-depth discussion with Vinci, focusing on the environmental pressures identified by our data provider and actionable levers to reduce them. Interestingly, the findings closely aligned with Vinci’s internal assessments. This provided an opportunity to discuss how we, as investors, use biodiversity footprinting tools and to clarify our expectations regarding metrics, which Vinci expressed an interest in understanding. We strongly advised the company to communicate on indicators that would enable stakeholders to monitor progress in minimising negative impacts on biodiversity.

Continued dialogue in 2023 enabled us to track progress on the development of an updated strategy and exchange views on the challenges Vinci faced as they arose. These challenges included reconciling bottom-up and top-down measurement approaches, harmonising them across its diverse group operations, and communicating a cohesive strategy.

In 2024, we discussed Vinci’s progress in developing its biodiversity strategy and offered feedback on its structure to address the diversity of the group’s operations. Specifically, we recommended organising its strategy by biodiversity pressure relevant to each trade, ensuring alignment with the mitigation hierarchy, and clearly distinguishing efforts to minimise negative impacts from positive contributions.

Overall, Vinci appeared receptive to the information and feedback, and shared our perspectives on key issues. Vinci recently updated its biodiversity strategy, which aligns with our key recommendations and indicates that this engagement has yielded tangible progress.* 

Dedicated biodiversity strategy-related engagements

We also carry out targeted engagements within our dedicated biodiversity equity strategies. In 2023, we engaged on the following topics.

Source: AXA IM, 2023. For illustrative purposes only. 

Deriving impact from change

Overall, we aim for an ‘impact engagement’ approach which is strategic in nature and has objectives that, if successfully achieved, should lead to meaningful positive outcomes. It will often focus on how capital can be allocated to drive the future ambitions of the company’s core activities, in line with the SDGs.

It goes beyond gaining insights into a company’s operational performance, mitigating risks of negative externalities or improving sustainability reporting. We believe engagement is a vital means of generating positive biodiversity impact in listed assets by focusing on the role of the investor as a significant change-agent. 

Looking ahead

We will continue to prioritise biodiversity as one of our key engagement themes - and within biodiversity, deforestation and pollution remain the key priority themes. We will continue encouraging issuers to strengthen deforestation and conversion-free commitments and to track and disclose their progress. For issuers who have reinforced their commitments, the focus will be on concrete actions and implementation mechanisms to deliver on objectives. We expect that increasing engagements, tools and scientific developments and the launch of TNFD will contribute to progress.

As work on deforestation and pollution matures, we expect to see engagement on water and the circular economy (including plastic and waste) to gain traction. There is a growing awareness of - or the potential for - water scarcity in the coming years and decades and the economic and social implications will become even more acute for both corporates and governments.

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*Companies shown are for illustrative purposes only as of 22 January 2025. It does not constitute investment research or financial analysis relating to transactions in financial instruments, nor does it constitute an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.