Why is it important to us?
Nature is the foundation of our economy, society and life itself, and biodiversity supports all life on our planet. However, biodiversity is eroding at a pace that is severely damaging the natural ecosystems that provide us with food, water and clean air. This in turn poses significant risks to economic, financial and social stability.
Global Developments in Biodiversity Regulation
- The French Energy-Climate Law Article 29 already requires companies and financial institutions to disclose biodiversity risks and impacts. France also became the first country in the world in 2020 to pass legislation requiring all new domestic washing machines to have a microfibre filter fitted, as standard, from the beginning of 2025;
- ‘Biodiversity sensitive area’ and ‘emissions to water’ indicators in the Principal Adverse Impacts of the EU Sustainable Finance Disclosure Regulation (SFDR), which fund managers need to disclose for the targeted funds;
- The European Union ban on imported goods that contributed to deforestation or produced in deforested lands. This new law will prevent the sale of products including beef, soy, and coffee linked to deforestation in the EU market.
Although these examples are European, we expect that there will be trickle-down effects from these regulations to other regions.
Globally, there is a growing momentum to address biodiversity loss, which is becoming more tangible. At the UN Biodiversity Conference (COP-15) in December 2022, heads of States agreed to adopt the long-overdue Global Biodiversity Framework and its new targets and goals.
In line with the adopted targets, companies and financial institutions will increasingly be expected to assess and disclose nature-related risks, opportunities, dependencies and impacts in the near term, to deliver the Post-2020 Global Biodiversity Framework goals and targets.
Financial institutions have an important role, as providers of capital, to mobilise the necessary investment and opportunities for nature protection and restoration, and as regulated entities to monitor, assess and disclose nature-related risks, dependencies and impacts on nature across investment portfolios.
As long-term investors, we believe biodiversity loss and land degradation is financially material and crucial to achieving a net zero and climate resilient future. Protecting nature is therefore in our own and our clients’ best interests.
Microplastics policy advocacy update
We believe in our collective responsibility to consider degradation of the natural environment as an investment risk in our decision-making processes, and further proactively collaborate with our industry to encourage the adoption of measures that reduce and mitigate this threat to human and environmental health.
Microfibres have been finding their way into our beaches, rivers and deep ocean, in the air we breathe and the food we eat for decades. Research by the First Sentier MUFG Sustainable Investment Institute (SII) outlines the sources and distribution of microfibre pollution, reasons for its urgent address and steps to prevent it.
Over the last 18 months, studies have shown the effectiveness of filters on washing machines in capturing microfibres before polluting our aquatic ecosystems1.
As outlined in our Responsible Investment Report 2020, FSI is leading, in collaboration with the UK’s Marine Conservation Society, a programme to engage with the manufacturers of domestic and commercial washing machines to fit filtration technology to their products, as a standard feature. In addition to engaging with companies, we have engaged with a number of regulators as part of this initiative. There has been considerable progress, as shown in the advocacy update below.
Table 2: Policy advocacy on microfibres
On Wednesday 2 November, the Microplastic Filters (Washing Machines) Bill had a second reading in the UK Parliament, requiring manufacturers to fit microplastic-catching filters to new domestic and commercial washing machines.
In support of the Bill, we engaged with the then UK Secretary of State for the Environment and various other senior ministers from across Government in collaboration with the UK Marine Conservation Society and UK Womens Institute who have long been campaigning this issue.
We believe the UK Government could take a global leadership position and prioritise this recommendation on microplastics, specifically to mandate the installation of microfibre filters in new washing machines by 2025.
Following a visit to our Sydney office by the Australian Minister for the Environment expressing an interest in the i we met with CEO Tony Chappel and the team at the New South Wales Environment Protection Agency.
The Agency was very aware of the risks of microplastic pollution and were interested in the engagement work that we had been undertaking.
It is due to hold a consultation early in 2023 on priorities, agreeing to include the issue of microfibre filters in that process.
As of January 2025, all new washing machines sold in Frssue,ance will have to include a filter to stop synthetic cloth fibres from polluting waterways.
We are now engaging with policymakers to gauge the potential or ongoing discussions for the French Law to be adopted across the EU.
1 (Washing Machine Filters Reduce Microfiber Emissions: Evidence From a Community-Scale Pilot in Parry Sound, Ontario, https://www.frontiersin.org/articles/10.3389/fmars.2021.777865/full)
We aim to develop a firm-level approach to key nature-related topics and sector guidelines. This will be accompanied by monitoring, progress reporting, and our assessment of various nature-related commitments made by investee companies.
We will continue to develop our work on scoping assessments using the Taskforce on Nature-related Financial Disclosure’s (TNFD). This is a new risk management and disclosure framework that aims to enable organisations to report and act on evolving nature-related risks. Along with this work, we aim to equip our funds with the resources to report on nature-related disclosure criteria, such as the ‘biodiversity sensitive area’ or ‘emissions to water’ indicators in the Principal Adverse Impacts of the EU SFDR.