The Significance of Biodiversity in Equities: An Explanation for AP3's Consideration of the Natural World
In a significant move to combat the effects of climate change, AP3, the Third Swedish National Pension Fund, has emphasized the urgency for asset owners to address biodiversity risk. Dr. Nicola Ranger, an academic at the University of Oxford, has compared biodiversity loss to a scorpion running towards us, suggesting that it could have serious consequences for climate change.
Fredric Nystroem, AP3's Head of Sustainability and Governance, who assumed his position in 2021, expects companies in AP3's portfolio to assess, manage, and report on risks in a structured manner. This approach aligns with the recommendations of the Taskforce on Nature-related Financial Disclosures, a global organization that provides guidance for companies to manage and report on nature-related risks.
AP3's latest stewardship report demonstrates the fund's efforts to push for improved biodiversity risk management at companies like PepsiCo, Home Depot, and Tyson Foods. A total of 179 of AP3's engagements include biodiversity as a theme, indicating the fund's active involvement in the issue.
The potential impact of biodiversity loss on climate change is critical, as warned by Dr. Ranger. Biodiversity loss would make climate change less predictable, amplifying its effects. The scorpion's sting, according to Dr. Ranger, would make climate change more severe.
For asset owners, the urgency is high to map and address biodiversity risk due to the potential impact on climate change. AP3's actions demonstrate the growing importance of biodiversity as a consideration in investment decisions. By encouraging companies to prioritize biodiversity risk management, AP3 is using its influence as a significant investor to contribute to a more sustainable future.
Inclusion of biodiversity in AP3's responsible investment policy in 2022 underscores the fund's commitment to this cause. Companies in AP3's portfolio are being urged to adopt a structured approach to assessing, managing, and reporting on biodiversity risks. This approach is expected to help companies mitigate the risks associated with biodiversity loss and contribute to a more sustainable future.
In conclusion, AP3's actions highlight the growing recognition of the interconnectedness between biodiversity and climate change. By addressing biodiversity risk, asset owners like AP3 can contribute to a more sustainable future and mitigate the potential impacts of climate change.
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