The decision by two of the world’s biggest asset managers to quit an investor group set up in 2017 to nudge companies to a net zero commitment must be a red flag for the Australian government’s nature-positive summit.
A Financial Times article this week said, JPMorgan Asset Management and State Street Global Advisors had both confirmed they were leaving Climate Action 100+. BlackRock, the world’s largest money manager, said it was scaling back its participation and would continue to prioritise financial results.
Climate Action 100+ was launched to challenge airlines, oil majors and other polluting companies to reduce their carbon footprint. BlackRock, JPMAM and State Street Global Advisors all joined in 2020. Vanguard never joined and, in late 2022, dropped out of another well-known climate grouping, the Net Zero Asset Managers (NZAM) initiative.
At the heart of these withdrawals lies the issue that these initiatives have pivoted from disclosure to action. Now that pressure is being applied to companies to actually reduce greenhouse gas emissions, not just measure them, the mega asset managers bailed. Citing US laws to “solely act in the clients’ economic interests”, net zero is suddenly a threat to future financial returns.
This is really the crux of all of these voluntary initiatives. Anything that reduces economic activity is incompatible with the logic of business and investing. Hence heading down the same path for ‘nature positive’, the biodiversity equivalent of net zero, could allow investors and business to create another 5 years of distraction and inaction.
The Australian Federal and NSWs governments are jointly hosting the Inaugural Global Nature Positive Summit in October 2024. The aims of the summit include maintaining the momentum on nature finance, create guidance for investors and attracting private investment into nature. The preliminary conference documentation says that the event has been created to bring together international ministers, corporate and finance leaders, NGOs etc. to design the necessary pathways for greater private investment in nature.
As Andrew King and Ken Pucker have highlighted on many occasions, such investments represent a marketing-induced trend that doesn’t provide a benefit for the planet and may defer governments from what can make a real difference, namely government mandated regulations. The reason ‘nature positive’ is such a vague concept is that it makes for such great marketing and PR copy whilst steering politicians and voters away from demanding mandatory regulation.
How talking about private finance for nature is equally a distraction is made clear in a World Bank 2020 report MOBILIZING PRIVATE FINANCE FOR NATURE. The report clarifies “biodiversity financing has important differences from climate. While climate finance has made progress through investment opportunities in renewable energy, ‘greening finance’ [Nature Positive] has been slower”. The report correctly states, financing biodiversity projects is difficult because there is no way to obtain monetizable cashflows; putting a price on something historically seen as a public good is challenging. Under the current model there are only two ways to make money from nature – biomass extraction (which we are already doing way too much of) and restricting access (privatising water sources etc).
Given this, the report goes on to state “Given these circumstances, integrating biodiversity risk into risk management more broadly (including through greening supply chains) is likely to have a larger impact [than seeking private investment into nature]”. This is an amazing admission by the authors. In their view ESG governance (risk management) has a better change of creating something useful than ESG investing. But just how well does voluntary corporate governance work?
We already know that ESG governance has been completely ineffective in changing business practices. Greenhouse gas emissions continue to grow and so is biomass extraction. Mandatory supply chain due diligence laws have been put on hold in the EU after Germany and Italy threatened to abstain. We also know that companies are scaling back their ‘commitments’ and ‘pledges’ under the constant onslaught from the right that ESG equals ‘woke’. This is more likely a convenient excuse than a real threat, boards and executives have zero intention of following through on commitments that disrupt supply chains and reduce productivity or profits.
The ESG experience should provide no illusion that nature positive investing could be another distraction, enable several more years for business-as-usual to be maintained. There is ample evidence of how the status quo is preserved from CSR, Triple Bottom Line Accounting, the Global Reporting Index, SDGs, Extractive Industries Transparency Initiative, Natural Capital – the list going on – they have provided a 30-year distraction from the government mandatory regulation that is the only way of arresting biodiversity loss and other planetary tipping point. The only surprise is the inability of populations to make the links and figure out that they are continuously being duped by corporations and their willing helpers in think tanks, academia, the media and so on.
As always, there are a handful of dissenting voices trying to point out the obvious flaws of the latest distraction. Already in September 2023 researchers concluded that nature positive commitments were at risk of becoming little more than greenwash. One reason for this was that the term was being applied so loosely by companies, governments and NGOs that in some instances it meant simply ‘doing things that are good for nature’. They continued that the lack of a clear definition of nature-positive may even cause active harm.
In all of this, one thing is certain, the world’s wildlife and ecosystems don’t have the luxury of time for these continued distractions, illusions of progress and greenwashing.
If government want to go the route of private investments and voluntary governance, they need to commit to providing proof that such strategies work and that they have a backup plan for when this strategy fails (which it will). Mandated regulations and moratoria on biomass extraction need to be options on the table, given the little evidence that business, investors and markets are intrinsically motivated to change, as was brought home by JPMorgan Asset Management and State Street Global Advisor withdrawal from Climate Action 100+ this week.
Politicians must have the courage to work for the many, and not do the bidding of the few.
Lynn Johnson is a physicist by education and has worked as an executive coach and a strategy consultant for over 20 years. In her work she pushes for systemic change, not piecemeal solutions, this includes campaigning for modernising the legal trade in endangered species, to help tackle the illegal wildlife trade.
