The loss of biodiversity is a critical global issue that threatens the well-being and livelihoods of all people. Infrastructure — essential, built assets that underpin the global economy — contributes to this crisis through five “nature impacts”: climate change, habitat change, pollution, resource use, and invasive species spread. 

In turn, biodiversity loss creates physical and transition risks for infrastructure. Mitigating these risks and investing in nature is critical to ensure economic resilience, drive sustainable development, and conserve our natural world. Infrastructure investors have made progress integrating environmental, social, and governance (ESG) considerations into investment decisions. However, there is room to better measure and mitigate the impacts of these decisions on biodiversity. 

Incorporating biodiversity into infrastructure investing

In a joint effort with WWF, the global conservation organization, we developed a white paper, titled “Biodiversity And Infrastructure Investing: How Infrastructure Investors Are Factoring Biodiversity Impacts Into Decision-Making". The paper is also supported by the United States Agency for International Development (USAID)–funded Asia’s Linear Infrastructure safeGuarding Nature (ALIGN) Project, which aims to enhance the development and implementation of effective, high-quality linear infrastructure safeguards that protect people and nature from harm.

The paper reveals how infrastructure investors and their advisors can incorporate biodiversity into investing. It explores approaches used to assess biodiversity impacts and investor rationale for considering these risks in decision-making, which presents perspectives on the outlook for further progress and where improvement is of most value.

In this white paper, most investors surveyed (82% of a sample size of 51 individuals) assess the climate change impacts of their portfolios. However, investors less commonly assess other nature impacts contributing to biodiversity loss: 59% of respondents assess habitat change, 45% resource use, 39% pollution, and 12% invasive species spread. These results reflect advanced awareness and action on climate change, while familiarity with other nature impacts is still developing.

Key methods and reasons for assessing nature impacts

Investors often rely on qualitative methods to assess nature impacts. Some incorporate quantitative metrics, such as area of land cleared. Quantitative measures are more commonly used in screening or managing assets, and less commonly in valuation or risk assessment, potentially leaving gaps in understanding and quantification of risks. Investors have made greater progress for infrastructure perceived as higher impact like utilities, energy, and transport sectors. However, there is room for improvement across the board. 

An increase in regulatory action and mounting institutional pressure on biodiversity loss will drive infrastructure funds and advisors to adopt broader, more sophisticated assessments of biodiversity impact and risks. There are three key reasons why infrastructure investors must act urgently on this issue. 

Biodiversity loss is a crisis comparable to climate change

Policy attention is expected to increase as governments translate the Global Biodiversity Framework, which set out targets and implementation mechanisms to guide and promote the updating and implementation of policies, goals, targets, and national biodiversity strategies and action plans. This will make addressing biodiversity an unavoidable part of infrastructure investing in the future. Investors and advisors must start to address both crises as a matter of diligent risk management.

Progress on reducing barriers to action is gaining momentum

Although there is a perceived lack of common standards among regulators, governments, businesses, and capital markets to mitigate biodiversity loss, substantial effort has been made to consolidate around a set of core biodiversity frameworks, such as the Taskforce on Nature-related Financial Disclosures (TNFD) which set common standards to report biodiversity impacts and risks in the financial space. TNFD is leading the way in achieving greater data availability, increase in legislation, and establishment of global risk mitigation standards. 

A nature-positive transition will create new opportunities

Emerging options for nature-positive investments will enable investors to adjust investment strategies to account for biodiversity conservation. These options include innovation in mitigating the nature impact of projects, such as habitat restoration and conservation, and new forms of investments such as biodiversity credits. A nature-positive transition will be essential to tackling biodiversity loss, beyond managing exposures to biodiversity risks through infrastructure assets.

Progress on developing new models of nature-positive and resilient investment will enable change among infrastructure investors. Although investors have started to play roles in accelerating this change, there is still much room to grow to lessen or reverse the impact of infrastructure on biodiversity.