Last month, Nature Action 100 named its target firms and investor participants as it began sending initial engagement letters.
At the time, the initiative said it was in the process of structuring engagement teams, each of which is expected to consist of one to four investors.
Responsible Investor reached out to all 190 investor participants to ask whether they have identified how many – and the types of – firms they would like to or have put themselves forward for.
Quality or quantity?
Fifty-three investors provided an exact or approximate figure for the number of targets identified.
Most respondents stressed the importance of prioritising quality over quantity.
Troels Børrild, head of responsible investments at AkademikerPension, told RI: “Our strategy is generally to pick very few companies, but do it well/more intensively.”
The Danish pension fund has put itself forward directly for two firms – Novo Nordisk and JBS – and others indirectly via EOS at Federated Hermes.
Abrdn has named just one firm in which it has a large holding. Ann Meoni, senior sustainability analyst – natural capital, said the UK manager believes it will be in a strong position to respond to the initiative as it “will help develop our knowledge of what is feasible and areas where other companies might struggle”.
Other investors which only selected a handful of firms said this was due to issues with engagement capacity and/or resource allocation.
One investor told RI that due to “constraints in resources” it will not participate directly in engagements.
Meanwhile Vert Asset Management said it had not put forward for any engagements as none of its holdings is on NA100’s initial target list.
Sarah Adams, chief sustainability officer and co-founder of the US asset manager, told RI: “While we’re supportive of NA100, we’re not able to fully participate at this point in time. We do hope that NA100 extends its list.”
Asked whether the initiative plans to add more targets, a spokesperson for NA100 said that the 100 firms already identified were the priority for engagement. “Longer term the list of companies may expand,” they added.
At the other end of the spectrum, some investors have named more than 15 target companies.
These include Green Century Capital Management, which has offered to engage with 21 US-based firms across the food, forestry and paper products, and household and personal goods sectors.
Annie Sanders, director of shareholder advocacy, noted that the firm has already engaged a number of the target companies on biodiversity-related sub-topics such as deforestation.
“We figured that, because we have a relationship and ongoing dialogue with many of the listed companies on issues inherent in the Nature Action 100 platform, it would be useful to continue those engagements in the broader, emerging context of biodiversity and natural capital,” she said.
She added that Green Century’s shareholder advocacy team is fully staffed heading into this proxy season, so the manager has the bandwidth to engage a high number of companies.
“We are active owners and prioritise shareholder advocacy as a key part of our model to help investors make concrete, real-world impact through their investments,” she said. “Biodiversity-related issues are our bread and butter, so we felt compelled to step up.”
Some investors with a longer list of targets noted that they were unlikely to be successful in all their engagement applications.
Lise Børresen, head of responsible investments at DNB Asset Management, said the firm has put itself forward to engage with a “large number of companies”. But, she added, some will likely have been selected by multiple other investors “might be a better fit for the requirements of the initiative”.
Investors who put themselves forward for fewer firms also flagged that some may be more popular than others and that the limited size of NA100 teams may mean they do not get onto all the engagements.
If any engagements are undersubscribed, Joe Horrocks-Taylor at Columbia Threadneedle Investments said the original group of investors who participated in the soft launch of NA100 “may look to support the engagements to ensure that all of the 100 companies have dedicated and experienced engagement teams”.
Sector breakdown
When it came to the sectors of engagement target firms, 45 investors provided information.
Of the eight priority sectors identified by Nature Action 100, “food” and “biotechnology and pharmaceuticals” were the most popular, being chosen by 25 and 23 investors respectively.
Interest was fairly evenly spread among the other sectors, with 16 votes for “forestry and paper”, 15 for each of “consumer goods” and “metals and mining”, and 12 for “household and personal goods” and “food and beverage retail and restaurants”.
Perhaps surprisingly, “chemicals” attracted the least attention. Just 11 investors flagged the sector, despite it accounting for the second-largest number of firms on NA100’s list (after “food”).
The majority of investors named firms in multiple sectors.
On the jurisdiction of target firms, 23 investors provided information. European companies attracted the most interest, reflecting the regional weighting among both respondents to RI‘s survey and NA100 signatories. Of the 190 investors involved in the initiative, 138 are headquartered in Europe or the UK, with 27 in the US.
Asked when the investor engagement teams would be finalised, NA100’s spokesperson said there had been “good progress” on the process but there was “no fixed deadline” for completion.
They noted that there is also no time limit on when investors can put themselves forward for engagements. “When investors express interest in the initiative, they can identify the NA100 companies they are interested in engaging with.”
Engagement pinch points
Asked how receptive firms might be to engagement on nature, most respondents were cautiously optimistic.
Many noted that sectors such as food and agriculture will likely be particularly receptive and may have already taken action, given that their links to nature are clear and they have already faced increasing scrutiny on biodiversity and related issues such as deforestation.
Jurisdictional diversity was also mentioned, with some investors unsurprisingly predicting that European firms may have greater awareness on nature-related issues given the regional regulatory landscape.
At the same time, all flagged that the topic is still very new for many companies, and perceived as challenging.
Walter Hatak, head of responsible investments at Erste Asset Management, told RI: “Through our own materiality assessment, we know there are low-hanging opportunities that investors can communicate to companies on, including to initially identify areas to assess and report on while preparing for more challenging areas.
“The role of investors at this stage should be to partner with companies to tackle challenges by sharing solutions, methodologies or resources that companies can use.”
When it comes to potential pinch points, a swathe of issues were put forward.
Diane Roissard, ESG analyst and biodiversity lead at La Banque Postale Asset Management, flagged the challenges of achieving biodiversity and climate targets where there might be conflict or misalignments, finding a balance between reporting and action in terms of resources allocation, and acting on biodiversity local impacts located in the upstream and downstream value chain when a company is struggling to build global traceability of supply chains.
If firms are unreceptive, various escalation tools were suggested by investors.
Green Century’s Saunders said that, depending on the outcome of upcoming engagement conversations, the manager “may file biodiversity-oriented resolutions this proxy season”.
And Lauren Compere, head of stewardship and engagement at Boston Common Asset Management, told RI: “If companies continue to be unresponsive in 2024, we may use escalation strategies like filing shareholder proposals and voting against certain board members during the 2025 proxy season.”
In July, RI explored how biodiversity-related resolutions are set to increase.
Lessons from CA100+
Some investors suggested that lessons could be learned from the experience of Climate Action 100+, which has many of the same signatories as Nature Action 100.
These include the need to focus on disclosures as well as implementation from the outset and the connection of engagement work to real impact.
Arthur van Mansvelt, senior specialist responsible investments from Achmea Investment Management, noted: “Although we are positive about CA100+, we also see that it takes a relatively long time for large initiatives to get up to speed and achieve results. The organisation can be burdened by a significant administrative and reporting load, and it is important that the central message remains intact even when a wide variety of investors join the conversation.
“The key is to strike a balance between the necessary documentation and reporting on one hand and achieving a tangible positive outcome on the other.”