In brief: Nuveen’s four steps to effective biodiversity due diligence

Private infrastructure has a 'big advantage' over other asset classes in addressing biodiversity issues, according to a panellist at Infrastructure Investor Network Global Summit in Berlin.

Private infrastructure investors have “a huge advantage” when it comes to understanding biodiversity risks and opportunities due to their localised nature, according to Melisa Simic, senior director for ESG integration at asset manager Nuveen. “You know exactly where your asset is located,” she said.

Simic was speaking on the opening day of the Infrastructure Investor Network Global Summit in Berlin on Monday. She explained how GPs should maximise this advantage by integrating biodiversity into investment due diligence. Here were her four steps:

  1. Early screening: Managers should “use your spatial data to understand what is the potential situation with the biodiversity surrounding your asset. We will use both private and public data sources to understand what is happening. We tend to do it at the portfolio level so that we can do a very comprehensive biodiversity footprint.”
  2. Establishing a baseline: “The idea is to make this process very participatory. If you make this baseline process very participatory you’ll have the buy-in and support of local stakeholders.”
  3. Action planning: Establish what mitigation and intervention measures are going to be put in place to achieve the desired outcome. This is an “opportunity to assess your impact and dependencies of the operation of your assets”.
  4. Data gathering: Managers should decide what data will be collected and what metrics will be used. Data collection decisions should be “tied to the action plan and the outcome that you want. It should be very specific to each asset. It’s not a one size fits all approach.”

On the same panel, Alistair Purdie, sustainable agriculture analyst at BloombergNEF, grouped biodiversity risk into three categories:

  • Physical risk: The impact an asset has on biodiversity and the effect that has on the asset valuation.
  • Transition risk: The impact that changes in biodiversity regulations may have on the value of an asset.
  • Systemic: The impact on valuation caused by macroeconomic decline induced by ecosystem breakdown.

Purdie also suggested that the multifaceted nature of biodiversity made it harder to implement a broad strategy. “I don’t think there will ever be an equivalent of CO2E and I think that is holding this sector back,” he said.

Irina Frolova, independent non-executive director and former head of infrastructure at PGGM, added that “system thinking” was needed to tackle the issue of biodiversity. She said: “We should be very wary when we try to solve problems with linear thinking.”