• Economic Research
  • Responsible Investing
  • ESG

Why investors should care about nature

There is growing concern about the impact of economic activity on the natural world. Investors can make a difference by focusing on those companies seeking to improve their behaviour and those developing products and services that will benefit the environment.

Why investors should care about nature

The term “natural capital” refers to the world’s stock of natural assets, including all living things, but also air, water, geology and soil. The destruction of this natural capital has received less attention than climate change but threatens companies in a range of industries.

Unfortunately, nature is easily exploited. Cutting down trees for new farmland or releasing battery-chicken effluent into local rivers is essentially free of charge.

One reason for the lack of progress is that it is much more difficult for policymakers and investors to assess a company’s impact on nature than its carbon emissions, which contribute to climate change. For example, a major chocolate manufacturer might have 500,000 farmers in its supply chain. How can we measure the impact of every one of those farmers? How many insects were killed by their pesticides? How many trees were felled for new plantations? In contrast, the carbon footprint of those farmers is easier to estimate.

Concern among investors about the impact of economic activity on natural capital is growing

However, concern among investors about the impact of economic activity on natural capital is growing. Agriculture is causing the most damage, being responsible for 80 per cent of global deforestation and 29 per cent of the world’s greenhouse-gas emissions.1 Reducing food waste and encouraging more efficient use of fertilisers and irrigation is vital to lessening the adverse impact of agriculture on the environment.

Investors can make a positive difference to nature by: investing in companies that are seeking to change their behaviour and their impact on natural capital for the better; seeking out innovative companies providing products or services that directly protect nature or lessen the harmful impact of human activity; and engaging with policymakers to improve standards on nature protection.

Policymakers could also, for example, impose taxes on meat or fish consumption and on nature-destructive activities like cruise ships. These taxes would help shift consumer behaviour and force positive change among companies.

Companies that do the right thing now should outperform in the long run

It is, however, encouraging that concern about the degradation of natural capital is rising. Our role as investors is to identify companies we believe to be leading on reducing their impact – and their customers’ impact – on nature, while at the same time ensuring investors see a good return. Companies that do the right thing now should outperform in the long run, as measured by financial returns and by their impact on nature.

Three points to remember

  • Concern over climate change has overshadowed the impact of economic activity on the natural world, but investor interest is growing and could play a major role in shaping company fortunes in the coming years
  • Investors can play a positive role in reducing the adverse impact of companies on the environment without necessarily sacrificing returns
  • There are some data challenges in identifying which are the best companies to invest in, but these can be overcome

Related views

Important information


Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable, but has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. Some data shown are hypothetical or projected and may not come to pass as stated due to changes in market conditions and are not guarantees of future outcomes. This material is not a recommendation to sell or purchase any investment.

The information contained herein is for general guidance only. It is the responsibility of any person or persons in possession of this information to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. The information contained herein does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it would be unlawful to make such offer or solicitation.

In Europe this document is issued by Aviva Investors Luxembourg S.A. Registered Office: 2 rue du Fort Bourbon, 1st Floor, 1249 Luxembourg. Supervised by Commission de Surveillance du Secteur Financier. An Aviva company. In the UK this document is by Aviva Investors Global Services Limited. Registered in England No. 1151805. Registered Office: 80 Fenchurch Street, London, EC3M 4AE. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119178. In Switzerland, this document is issued by Aviva Investors Schweiz GmbH.

In Singapore, this material is being circulated by way of an arrangement with Aviva Investors Asia Pte. Limited (AIAPL). Please note that AIAPL does not provide any independent research or analysis in the substance or preparation of this material. Recipients of this material are to contact AIAPL in respect of any matters arising from, or in connection with, this material. AIAPL, a company incorporated under the laws of Singapore with registration number 200813519W, holds a valid Capital Markets Services Licence to carry out fund management activities issued under the Securities and Futures Act (Singapore Statute Cap. 289) and Asian Exempt Financial Adviser for the purposes of the Financial Advisers Act (Singapore Statute Cap.110). Registered Office: 138 Market Street, #05-01 CapitaGreen, Singapore 048946.