Most financial firms are failing to see how
That's one conclusion you could make from the latest financial disclosure report from
CDP findings show threats from climate change receive board-level oversight in more than 90% of its surveyed firms, but less than a third of financial institutions give concerns about forests and water the same level of attention. And while this gap is important, a sense of direction means more: Another one-fifth of CDP's respondents said they plan to extend board-level oversight to nature-related challenges within the next two years.
If things move at that pace, disclosure on nature issues could be almost as common as climate reporting in less than six years. Nature, in other words, could be the new climate when it comes to priorities for the world's biggest financial institutions.
While climate- and nature-related risks are exactly that (risks), CDP's respondents do not see them as only downside.
More financial institutions view climate, forests and water as opportunities than risks in their portfolio. The survey found 10% and 13% of companies identified risks with forests and water, but 13% and 15% identified opportunities with those categories, respectively.
Financial institutions are not fully using their voting rights on nature or climate at the moment, to the responses collated by CDP. Three-quarters of financial firms exercise their shareholder voting rights on climate topics today. Only 40% do so on forest issues, and 39% on water.
That said, they are planning to focus more on this in the future: Financial institutions expect to increase their voting rights exercise on nature issues by 28% in the next two years. That would pull bring their participation close to today's climate voting.
One of the biggest factors that will drive more action on forest and water risks is having more knowledge about natural systems in the boardroom.
CDP found that 68% of boards disclose at least one member "with competence for climate-related issues," but only 24% have at least one member with knowledge on how forests and water relate to their business. CDP says that "the majority of FIs [financial institutions] that do not have this competence on their board indicate that they see the issues as important, but not an immediate priority."
Those priorities may get reordered. If financial institutions expect to significantly exercise their voting rights on nature-focused resolutions, then surely they will prefer to have that expertise in-house.
Moreover, the number of banks and insurers present at the UN Convention on Biological Diversity conference in Montreal at the end of last year shows the financial community is starting to move nature
All of this is a call to action for the world's financial institutions' boardroom. Nature-related issues are both a risk but also, for the quickest movers, a potential opportunity. And capturing that opportunity, from the boardroom down, will begin with staffing decisions. If nature is the new climate, then it requires matching expertise in the boardrooms of major organizations.
