PGGM’s Commitment to Nature & Biodiversity: An Update

Risks and challenges
The World Economic Forum (WEF) ranks biodiversity loss and ecosystem collapse as the fourth highest risk on the financial sector, over a 10 year period¹. The loss threatens the functioning of our socioeconomic system, as ecosystem services underpin economic activities. Both society and the economy rely on these services, making the decline in nature a substantial risk for long-term investors like PGGM.

PGGM’s relation to nature and biodiversity is twofold. On the one hand, we invest in companies that rely on ecosystem services for their goods and services, while also investing in companies that contribute to biodiversity loss through activities such as land use change, resource exploitation, climate change, pollution, and the spread of invasive species. The integration of nature and biodiversity into investment strategies poses challenges for institutional investors, primarily due to the complexity of this topic, and limited availability and quality of data. We expect the latter to improve thanks to the popularity of industry initiatives such as the Taskforce for nature related disclosures (TNFD) and increasing regulatory pressure. Companies impact nature in different ways depending on the type of business activities as well as the geographical location. This makes measurement of nature and biodiversity complex. However, we see this as an opportunity to address environmental sustainability through a more holistic lens, complementing our work on climate mitigation (reduction of GHG emissions).

What is PGGM doing?
Nature and biodiversity have been an important topic for PGGM and our client, PFZW. Over the past years, we tackled this topic in multiple ways:

• Engagement: Since 2021, PGGM has been including KPIs related to circularity, water management and deforestation into its climate-related engagement efforts. This blog describes a recent outcome of one of these engagements related to water management with McDonald’s Corporation.
• Finance for Biodiversity: In 2022, PGGM has been committed to the Finance for Biodiversity Pledge and joined the Finance for Biodiversity Foundation. We are active members and we contributed to the development of investor guides on engagement with investee companies and target setting for asset managers.
• Position paper: In 2023, PFZW published a position paper on nature and biodiversity in which they present their perspective on the topic, their current work and the next steps that they were planning to take. These steps included a strategy to mitigate the negative impact of their portfolio on nature and biodiversity and the development of a dedicated active ownership program.
• Voting on AGMs: Since 2023, nature and biodiversity are included in PGGMs voting guidelines. These guidelines outline PGGMs expectations for investee companies to mitigate the extent of their negative impact by embedding the preservation of nature into their strategies and by adopting virtuous practices such as resource efficiency, circular design and processes, and sustainable procurement.
• Engagement: Since last January PGGM formally has a dedicated engagement program, on nature and biodiversity. This program calls upon companies to implement targets and strategies to minimize their contribution to nature and biodiversity loss.

Next steps
PGGM is committed to the Finance for Biodiversity pledge and is currently looking into how it is able to integrate the topic in its investment process, recognizing its importance and the need for acceleration. In line with the pledge, PGGM will set targets in line with the guidance of the Finance for Biodiversity Foundation in 2024 and will develop a strategy to mitigate the negative impacts of our portfolio on nature and biodiversity.

By collaborating with peers, governments, and NGOs, we aim to deepen the integration of nature and biodiversity into the climate political discourse, facilitate the development of share methodologies and metrics, and stimulate the expansion of investible opportunities in this domain. This will enable for even more coordinated action from institutional investors.

¹ World Economic Forum (2024), The Global Risks Report 2024. Available at: WEF_The_Global_Risks_Report_2024.pdf (weforum.org)