CACEIS BIODIVERSITY QUIZ - Marketing Alpha

Will you be a biodiversity champion?

The Biodiversity Challenge

Concerns about biodiversity and environmental risk are growing. According to the World Economic Forum, biodiversity loss and ecosystem collapse ranked as the top four risk by severity over the next ten years. It is viewed as one of the fastest deteriorating global risks over the next decade. How do you use your fiduciary responsibility to limit your pension scheme’s investments and protect members from these risks?.

Your aim

There are misconceptions that assessing biodiversity risk is too complex or difficult to track progress on. Your aim is to navigate through the different aspects of biodiversity and environmental risks so you can make decisions that will be beneficial to the environment and to your members. We produced this in partnership with the London Zoological Society.

Understanding exposure and investing in resilient and adaptive supply chains – ones that stand to protect nature.

Managing biodiversity loss is going to be a growing focus of our time. Select what you think is the biggest driver of biodiversity loss today(Required)
- Changing land use for food production
- Climate change
- Pollution
Changing land use by companies for food production is the biggest driver of nature loss. For example, drivers linked to food production cause 70% of terrestrial biodiversity loss and 50% of freshwater biodiversity loss. About 50% of the world’s habitable land area is already used for agriculture. The average decline in population size of wild animals is 69% between 1970 and 2018)

If you want to learn more about climate risk, please listen to our podcast series, the CACEIS Climate Briefing here

How dependent are we are nature?(Required)
- Many companies are dependent on nature and the services that it provides
- Companies are not really that dependent on nature
More than half the world’s GDP can be linked to nature. Companies can be impacted by biodiversity and environment risks through their supply chains. Identifying these dependencies will key to managing future risks

A good example is our dependency on forests to provide products such as timber, food, fuel and bioproducts – which it vital for many companies. However, risks to this dependency occur through, for example, changing land use for agriculture, which is leading to widescale deforestation.

What next?(Required)
- I’ll rely on my scheme’s asset managers, or my consultant, to inform me of what they are doing on biodiversity risk
- I’ll develop a framework to help me have a dialogue with my asset managers on how they are managing biodiversity risk
Strong stewardship and engagement is the key to managing your scheme’s exposure to biodiversity risk. A good starting point is setting out a framework or policy for your scheme around biodiversity risk and use this as a basis to facilitate strong dialogue with your asset managers or consultants

What are the key risks for pension schemes to biodiversity loss?(Required)
Select all that you think apply
- Physical risk
- Regulatory risk
- Transition risk
- Systemic risk
In fact, all are key risks. We explain them in a bit more detail here:

Physical risk: this means share-price losses caused by, for example, a re-evaluation of a company, debt-servicing capacity and rising business costs from factors such as diminishing supply of raw materials.

Litigation and regulatory risk: As biodiversity risks become more known, new regulations could impose investing limitations and pensions schemes could come under more public scrutiny, expanding reputation risks.

Transition risk: the risk that by taking a ‘wait and see’ approach, a pension scheme could be investing in stranded assets, which fall in value, or are in sectors subject to long-term price increases and rising taxes.

Systemic risk: overall risk to the market from the threatening effects from global biodiversity loss, or where sectors of the economy can no longer be insured at a reasonable cost.

You’re trying to narrow down a section of your scheme’s portfolio that is most at risk to biodiversity loss. What’s your first step?
- Ask my asset manager.
- Wait and see
- Try and identify which sectors are most at risk
Certain industries are more prone to biodiversity risks. For example, food production, tourism, agriculture and forestry industries usually require intense harvesting of natural resources or rely on a single type of crop or livestock. It’s important that they focus on making their supply changes more resilient and adaptive not only protect nature, but to limit the biodiversity loss or challenges

The food and beverage sector is exposed to biodiversity loss because it depends on natural capital for raw materials. This can impact agricultural producers or companies that depend on agricultural products in their supply chains. It also means companies in this sector should be focused on providing well-managed approaches to natural assets to protect ecosystems.

Fashion has complex value chains and relies heavily on natural capital, including raw materials and water usage in manufacturing, and can impact the natural environment through chemical usage in processes such as dyeing and printing.

The information on biodiversity risk is still less than perfect. What do I do?(Required)
- Wait and see
- Begin to act and start establishing a policy on biodiversity risk.
Act now. Unlike the standard reporting frameworks that exist for monitoring carbon emissions and pollution, there are no universal measurements for reporting on biodiversity. Despite this, tools are available for pension schemes to map high priority sectors that are most exposed to biodiversity risk and they can start by building a policy on how they want to mitigate these risks and engage with their asset managers on the topic
- Set sector level policies based on those sectors most exposed to biodiversity risks
- Set goals around biodiversity topics, like deforestation
- Set an engagement approach with your asset manager and assess their willingness to talk about biodiversity risk. How are they reviewing the supply chains of the companies they invest into and are they ‘groundtruthing’ – on-the-ground due diligence
- Set goals and monitor

What should be the end goal in integrating biodiversity risk into your governance processes?(Required)
- Mitigate risk for your members
- Become nature positive
Both. Like ESG and climate risk, biodiversity risk is another factor that needs to be managed to help protect members’ pension pots. And by engaging with your asset managers on biodiversity risk, your scheme is playing an active part in nature’s recovery – by being nature positive. The Task Force for Nature Related Financial Disclosures (TNFD) UK pension schemes over £1 billion in the UK have only recently started adopting the Task Force on Climate Related Financial Disclosures (TCFD) to assess and report on climate risks. TCFD has helped pension schemes develop a strategy and policy to managing climate risk – and how each scheme gets there depends on the data available to them, TNFD shares the same concepts as TCFD but with a focus on managing nature-related risks and opportunities. TNFD does share the requirements with TCFD on the reporting of climate risks. The TNFD framework is expected to launch in September 2023. We anticipate that similar if not more data challenges that will apply to TNFD, however it will certainly provide a structured path to increase disclosure ambition over time. You can learn more about TNFD here.

Your total score is

You are a biodiversity champion

You are already gaining a good understanding of the risks and opportunities

Biodiversity is a complex topic – We have a range of resources at CACEIS Academy here

If you would like to arrange a training session on climate or biodiversity risk, visit CACEIS Academy here
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Will you be a biodiversity champion?

Your aim