The responsible investment manager at London CIV pension pool has warned that natural capital is the most important issue that investors should be concerned about.
Gustave Loriot, addressing the Pensions and Lifetime Savings Association local authority conference, said: “From a systemic risk perspective, natural capital is the single most important issue which we should as investors be worrying about.
“This is because natural capital, and the ecosystem services it generates, is responsible for more than half of global GDP.”
Natural capital is the world’s stock of natural resources, such as soil, water and all living organisms, which make human life possible and thus underpin the economy and society.
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London CIV, which manages the assets of 32 local government pension funds, first incorporated natural capital issues into its 2021 stewardship policy.
“We set clear priorities in the policy for natural capital issues such as water risk, biodiversity loss and plastic pollution,” Loriot said.
The LGPS pension pool then assessed the natural capital risks its investments were exposed to and used this evaluation to conduct targeted engagement with companies vulnerable to the same risks.
This year London CIV has expanded its priorities to include deforestation and land use change.
Loriot emphasised that London CIV’s commitment to natural capital was critical for its vision to invest in a “sustainable financial system which is fit for the future”.
But he highlighted that natural capital can be a complex topic to address for investors and pension pools, as many environmental variables are on a local and asset-level basis rather than a global scale.
Loriot also recently spoke at a Room151 roundtable debate that examined the biodiversity opportunities and risks for the LGPS.
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