Fund managers have increasingly placed biodiversity within their ESG frameworks, recognising that biodiversity loss is not just an environmental issue but a material financial risk that can affect investment performance and portfolio resilience.
According to Lonsec Research and Ratings, the number of managers reporting a biodiversity policy position has surged from 21 to 72 over the past year, out of a universe of around 300.
Lonsec’s internal rating of the strength of these policies has also more than doubled, indicating a significant uplift in both the quantity and quality of biodiversity-related initiatives.
Head of sustainable investment research, Tony Adams, said the upward trend reflects an industry-wide recognition that biodiversity loss is a systemic risk requiring integrated and proactive management strategies.
“For many fund managers, the initial steps involve acknowledging biodiversity risks within broader sustainability or climate change statements. However, a closer look at industry practices reveals a spectrum of approaches,” Adams explained.
According to Lonsec, some managers have embedded biodiversity considerations within broader ESG frameworks, including metrics such as natural capital, deforestation risk, and exposure to sensitive ecosystems.
Others have taken a more targeted approach, developing standalone biodiversity policies, toolkits, and roadmaps to guide investment and engagement strategies.
Many are also engaging with global initiatives aimed at promoting biodiversity conservation, the firm found.
Increasing participation in investor coalitions such as Nature Action 100 and adherence to frameworks like the Taskforce on Nature-related Financial Disclosures (TNFD) are helping standardise reporting and foster collaboration, ensuring that biodiversity risks are identified and managed more effectively.
Despite the progress, Lonsec noted the landscape remains uneven as many fund managers mentioned biodiversity within ESG or sustainability reports but have not yet formalised policies with clear targets and metrics.
In other cases, policy language remains generic, lacking specific commitments or frameworks to address biodiversity loss.
The evolution of biodiversity policies has been driven by investor demand for stronger ESG disclosures and heightened regulatory scrutiny.
Improved Lonsec scores and a threefold increase in biodiversity positions show the industry is moving toward a more systematic, transparent, and strategic approach to managing biodiversity risks.
“The momentum behind biodiversity in ESG policies signals a significant cultural and operational shift within the asset management industry,” Adams added. “With a marked increase in both the number and strength of biodiversity policies, fund managers are demonstrating a deeper commitment to mitigating environmental risks and contributing to a more sustainable financial ecosystem.”
As biodiversity considerations continue to gain traction, Lonsec anticipates that integration into investment decision-making will become a key determinant of both financial performance and environmental impact.
