Investor demand and regulatory scrutiny are driving a biodiversity evolution.
Biodiversity is rapidly emerging as a core component of Environmental, Social and Governance (ESG) policies among fund managers, reflecting growing recognition of its financial and systemic implications.
Recent analysis of the Lonsec manager universe shows a sharp increase in biodiversity-related disclosures. The number of managers reporting a policy position on biodiversity has surged from 21 to 72 in the past year, out of approximately 300 managers. Lonsec’s internal rating of the strength of these policies has also more than doubled, signalling a significant improvement in both quality and depth.
This trend underscores an industry-wide shift toward proactive management of biodiversity risks, which are increasingly viewed as material to long-term portfolio resilience. Approaches vary:
- Some managers integrate biodiversity into broader ESG frameworks, using metrics such as natural capital and deforestation risk.
- Others adopt dedicated biodiversity policies, toolkits, and roadmaps to guide investment and engagement strategies.
Global initiatives are also gaining traction. Participation in coalitions like Nature Action 100 and alignment with frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD) are becoming common, helping standardise reporting and foster collaboration.
Despite progress, gaps remain. Many managers acknowledge biodiversity risks but lack formalised policies with measurable targets. Integration often occurs indirectly through climate strategies, and some disclosures remain generic.
Investor demand and regulatory scrutiny are driving this evolution. Enhanced transparency and structured approaches to biodiversity risk management are expected to become critical differentiators for fund managers seeking to maintain trust and deliver sustainable outcomes.
