In recent years, investor stewardship on biodiversity has begun to flourish. Companies across a range of sectors are increasingly scrutinised for how they are mitigating their risks, dependencies and impacts on ecosystems.

But the topic is not yet a prominent feature at AGMs. Analysis by think tank Planet Tracker shows that between 2010 and the end of 2022 only 38 proposals on biodiversity-related matters were filed, and investors were relatively unsupportive of them.

Of the funds that disclosed the rationale for voting against, reasons included that the proposal was overly prescriptive, the company already reports on biodiversity, there were insufficient shareholder benefits, or the company already had a relevant policy.

Commenting on the findings, BNP Paribas Asset Management’s head of stewardship for the Americas, Adam Kanzer, tells Responsible Investor: “The big takeaway from the report is the reality that there haven’t been many biodiversity-related proposals – even deforestation proposals aren’t that common. This has been a tremendous frustration over the years given how critical and urgent it is as an issue.

“I also find it incredibly frustrating to read that even when these biodiversity/biodiversity-related resolutions have come up they don’t get much support and the reasons given don’t make sense.”

Part of the explanation could be that investors are still grappling with understanding biodiversity risk and its materiality to holdings. Leslie Samuelrich, president of Green Century, says: “Some of the reasons we’ve heard for lack of investor support for more general biodiversity-related proposals are that they are unconvinced of the materiality of the risks presented by ‘biodiversity loss’ – essentially that they see insufficient shareholder or company benefits.”

Kelly Hirsch, head of ESG at Vancity Investment Management (VCIM), says part of the reason biodiversity isn’t featuring at AGMs is the complexity of the topic and the lack of broad frameworks – such as the recently launched Science Based Targets Network (SBTN) and Task Force for Nature-Related Financial Disclosures (TNFD) – to base proposals around.

“While GRI provided metrics that companies could use to report on biodiversity, this was often seen as micromanaging,” says Hirsch.

But last year the Canadian investor filed a resolution that, according to the 2023 annual Proxy Preview report, became the “first to invoke the new TNFD”. It was a shareholder resolution at Costco that called on the retail giant to “complete a material biodiversity dependency and impact assessment and prepare a report to identify the extent to which the company’s supply chains and operations are vulnerable to risks associated with biodiversity and nature loss”. VCIM withdrew the proposal when Costco promised to start evaluating biodiversity impacts, pilot the TNFD, and report on progress in 2024.

The investor has also previously filed proposals related to pesticide disclosures and chemicals with grocers, manufacturers and rail companies. Hirsh points to a proposal at Metro asking the company to specify with its suppliers the commitments they should make to preserve biodiversity. It received a strong backing at 37%. “It shows a lot of investors understand that biodiversity risks in agricultural supply chains are material to the large grocers.”

And some biodiversity-related proposals have secured majority support. Samuelrich says a vote at Home Depot in 2022 on responsible wood sourcing got 64%, while a 2021 resolution at Bunge on strengthening its no-deforestation policy got 98%.

“Part of the reason these were successful is that we made tailored, laser-focused arguments around why deforestation-related risks in particular were material for these specific companies,” Samuelrich tells RI.

Deforestation is also a key component of EOS at Federated Hermes’ voting policy through targeting directors at companies where disclosure on and management of deforestation risks is lagging. Last year it recommended votes against directors at TJX, Kikkoman Corp and WH Group.

Sonya Likhtman, engager for EOS at Federated Hermes, said she believes shareholder proposals on topics related to nature have increased over the past few years, including on deforestation and plastics. “These can be powerful for focusing boards and management teams on a company’s role in addressing biodiversity loss.”

2023 season

This year’s AGM season appears to have seen biodiversity-related topics feature somewhat more prominently. For La Banque Postale Asset Management, there were 12 resolutions in its voting perimeter – eight in the US and four in Canada – surrounding related topics like water pollution and plastic, but none on biodiversity directly.

UK investor Schroders supported a series of biodiversity-related shareholder resolutions, including one at Charles River Laboratories calling on the firm to disclose – among other things – the measures it is taking “to mitigate its impact on dwindling populations in nature”. It also supported resolutions regarding water risk at Kraft Heinz and plastic pollution at Dow Inc.

Sarah Woodfield, active ownership manager at Schroders, explains that the asset manager has set the expectation that it wants companies to establish board-level responsibility and accountability for biodiversity and natural capital, as well as to measure and manage their negative impacts on nature.

“We align our voting approach with our engagement asks and we have seen an increase in the number of biodiversity-related resolutions concerning deforestation and plastic pollution in recent years in addition to thematic focus on water,” says Woodfield. “For many of these we have been seeking better transparency for business models that are highly dependent on ecosystem services for long-term business success or highly exposed to regulatory risk given their high impacts on nature.”

Diane Moulonguet, SRI analyst at La Banque Postale Asset Management, says biodiversity issues have also been raised in questions to companies at AGMs. For example, La Banque Postale asked a question at the Carrefour AGM this year about deforestation in the supply chain for Brazilian-sourced beef.

Planet Tracker told RI it does not yet have complete enough data to provide numbers for 2023 but will be conducting further analysis later this year. 

Looking ahead

Trying to predict trends for next year’s AGM season, Antje Stobbe, head of stewardship at AllianzGI, said she expects a rising focus on biodiversity and resolutions focused on “the impact on nature or requesting companies to report on their biodiversity risks”.

Planet Tracker too is “cautiously optimistic”, with a spokesperson telling RI: “We should reasonably expect an increase in the number of proposals as biodiversity measures collapse and frameworks – for example, the TNFD – expose both corporate dependency and impact on biodiversity.”

Hirsch is also hopeful and believes there will be an increase in biodiversity-related proposals. “That said, specific to TNFD and SBTN, it is hard to say if proposals will specifically ask for these frameworks, as deforestation proposals have already demonstrated the ability to get strong support – so [they] are more likely to be brought forward.”

In contrast, Samuelrich at Green Century says: “My guess is, now that we’ve got some initial stuff on freshwater and land from SBTN, we will probably try to see how we can ask companies how to set targets based on them.”   

However, Samuelrich stresses it will be an “uphill battle”, as companies probably won’t have the information or capabilities to meet the targets immediately. “It took a few years of investors pushing SBTi to make it commonplace. It’ll be about getting those first movers to understand and take action and then you gain momentum.”  

It is also believed that some investors are mulling resolutions asking for biodiversity transition plans, while – as Stephanie Maier, global head of sustainable and impact investment at GAM Investments, notes – biodiversity could also appear more prominently in climate transition plan resolutions “as investors and frameworks such as the Transition Plan Taskforce encourage the disclosure of dependencies to delivering on transition plans, of which nature is undoubtedly key”.

BNP Paribas AM’s Kanzer, however, is more optimistic about broad-based resolutions, as they “are more likely to get support from investors than more narrowly focused proposals that tackle an ecosystem-specific impact”.

“First, a large company is likely to have multiple impacts and dependencies on nature, and second, investors are not likely to be as aware of each specific instance. I think a broad-based approach that focuses on the board’s responsibility is more likely to gain significant votes.”

Say on Nature?

La Banque Postale AM, Federated Hermes and AXA IM all told RI that in recent years they have noticed votes being put forward by companies on their climate plans that also incorporate biodiversity and/or broader environmental targets.

In 2021, French construction giant Vinci got 98% approval of its environmental transition plan. Then in 2022, Nexity put forward its biodiversity and climate transition plan, which received 88% support.

And in 2023 real estate company Covivio submitted its climate transition plan – which included a biodiversity target for 2025 – for a vote. It received 94% support.

Although it is a positive signal to see nature being incorporated, it poses a voting dilemma for investors, according to Diane Roissard, ESG analyst and biodiversity lead at La Banque Postale Asset Management. For example, the investor voted against the plan of one of the companies, because they felt it wasn’t meeting the highest standard on climate.

“We of course want corporates to disclose their transition plan regarding nature, and yes, it’s good they’ve merged them as we want them to address the nexus, but at the same time it makes it complicated, [because] if their standards on one are not high enough, we cannot support them,” she explains.

“So if a company can put something forward that is ambitious for both issues, then they can go together, but if one is going to be less mature than the other I think it’s better to separate.”

Going further, Federated Hermes’ Likhtman believes the majority of companies are not yet ready to put forward Say on Nature proposals. “Companies should instead focus on assessing their impacts and dependencies on nature, and developing strategies and timebound targets to address the most material risks.”