Australia’s major banks and superannuation funds are failing to properly assess the damage their investments and financial decisions do to nature or set targets to reverse that damage, according to new analysis.
How businesses manage nature-related risk is one of the major items under negotiation at a global conference in Montreal where countries are trying to settle a new international agreement for nature.
Countries at the Cop15 biodiversity conference are preparing to vote on a global target that would require businesses and financial institutions to report on how dependent their supply chains and portfolios are on nature, as well as the impact they have on nature.
Research by the Australian Conservation Foundation (ACF) finds Australia’s major banks and super funds are largely unprepared to mitigate risks or seize new opportunities associated with their dependence on nature.
While destruction of nature was considered an issue that needed their attention, only three organisations – Future Super, Australian Super and NAB – indicated they had assessed the risks and opportunities, and only 40% had plans to do so.
Among the 20 super funds and retail banks surveyed, 90% of funds and 80% of banks had not set nature-related targets for issues including ending deforestation and degradation of habitat. Just 20% indicated that they planned to – a figure the report labelled “abysmal”.
The report argues net zero claims by companies lack credibility if they do not include a target to end deforestation.
It finds none of the big four banks had deforestation targets. Just one super fund – Australian Ethical Super – had a deforestation and land conversion policy and four banks – Bank Australia, HSBC, Rabobank, and Bendigo and Adelaide Bank – had one. No bank or super fund surveyed had a policy related to biodiversity offsets and only 50% had a carbon offset policy.
“Whether it’s a business destroying wildlife habitat for more cattle grazing in Queensland, or a property developer knocking over trees for more suburban sprawl, there’s almost always a financial institution bankrolling the activity,” said ACF’s business and nature campaigner Nathaniel Pelle.
“The financial sector bears particular responsibility for reversing the nature crisis because it decides which activities are financed or insured and under what conditions.”
The report finds that although Australia has the developed world’s highest rate of nature destruction, companies were more likely to have policies to avoid financing nature destruction overseas – such as palm oil financing – than to protect the koala and other Australian species.
The Albanese government confirmed on Monday that it would develop a climate risk disclosure system that would require banks and other big businesses to publicly reveal what they were doing to cut emissions. It is also looking at ways to crack down on “greenwashing”, when businesses try to win over consumers by overhyping their environmental practices. There is no requirement for businesses to disclose their impact on nature.
Tim Beshara, the Wilderness Society’s manager of policy and strategy, said companies should view managing biodiversity risk as “basic business planning”. “Sometimes a company will only act when it’s their short-term financial interest at stake,” he said.
He said a “textbook example” of failing to manage biodiversity risk was major supermarkets’ reliance on pallets made from wood supplied by VicForests being affected by court decisions that stopped native forest logging that threatened native species.
“They chose to be reliant on a product closely associated with increased species extinction risk, so when the court inevitably acts to protect endangered species and there’s no VicForests timber to make pallets, they end up with a supply chain shock that reverberates throughout their business,” Beshara said.