Funds urged to deliver more investment in nature-positive assets

The insurer's Nature and Biodiversity: The Pensions Imperative report - published today (14 March) - said pension funds can play a critical role in protecting nature via investment and "harness the potential for financial growth".

The report made a series of recommendations on how to enable nature-positive asset allocation including calling on the government and regulators to "deliver transformative policy action". The firm also called for pension funds to consider the systemic risk of biodiversity loss and adopt the Taskforce on Nature-related Financial Disclosures framework.

Scottish Widows suggested nature-related risk management will be expected from businesses and pension funds "in the same way as climate-related risk management is". The firm said it is "critical" to allow accurate assessment of complex exposures to nature-related risks and identify the opportunities that will underpin resilience and returns in the long term.

The report stressed the need to "act now to save the future". It noted while parts of the pensions industry are "still grappling with aligning fiduciary duty and certain material ESG issues", investors should "consider the systemic risk".

The report made recommendations for how to approach biodiversity in pension investment, stewardship and advocacy strategies. These include increasing awareness and building capacity, assessing portfolio exposure, supporting corporate engagement and transformative action, and carrying out policy and regulatory advocacy.

Scottish Widows also warned "this is crisis-time" - urging the government to demonstrate leadership in protecting nature, establish an incentivising policy, implement clear governance and accountability, and optimise planning and engagement.

Head of responsible investments and stewardship Maria Nazarova-Doyle said: "Nature degradation and biodiversity loss, together with climate change, are among the greatest threats to our planet, society and the economy.

"While there has rightly been much focus on climate change and the role pension providers can play in supporting companies to transition to net zero, far less attention as been paid to nature and biodiversity."

She warned pension funds "play a huge role in the economy".

"Their investment decisions don't just influence the long-term financial wellbeing of millions of savers, but have the potential to influence the long-term health of nature and the planet too.

"In order for nature-positive pension investment to materialise, pioneers and policy makers must band together, doing more to engage and educate the industry on how to positively reshape portfolios and avert ecological collapse. This isn't simply a balance sheet issue - it's an existential one too."