Companies experiencing nature-related investor engagement perceive these interactions as value-generating and as a driver of corporate strategic change, a report on Corporate Nature Risk Perceptions from the European Corporate Governance Institute shows.
A global survey of 385 companies reveals that when investors speak about biodiversity and ecosystem services, boards and management teams actually listen and act.
Yet companies expect investors to continue to prioritize climate over nature, although “many think both topics are so intertwined that they cannot be separated.”
This perception, in my view, goes back to an issue that reduces the effectiveness of sustainability approaches in real life. Sustainability has indeed often been approached in siloed expertises: the transition was all about the environment and climate before just transition came along. Likewise, within social factors, DEI still tends to separate race from age from gender and other factors when none of it can be really effective without intersectionality. The result is often that groups feel pitched against each other, for instance, young vs. older, when all the value comes from the connection between generations.
The causal impact of engagement
For years, it has been difficult to prove whether investor meetings actually cause companies to change or if they simply coincide with actions the company was already taking. The report supports the case for a causal link.
- Shifting strategic decisions: While 35% of all surveyed companies report that engagement influenced their strategic or operational decisions, this number jumps to 56% for companies that have directly experienced interactions with investors.
- Adopting best practices: Companies credit these interactions with helping them establish formal sustainability strategies and align their disclosures with industry leaders.
- Improving disclosures and risk management: Firms that reported being influenced by engagement were 20 to 30 percentage points more likely to conduct nature dependency assessments, implement risk management plans, and provide public disclosures.
The ‘inside-out’ power of investor voice
Engagement does more than just apply external pressure; it influences internal corporate dynamics. Companies view these interactions as value-generating, with 73% of those actively engaged reporting benefits to their business.
- Internal leverage: For 28% of companies, investor interest serves as a tool to raise the internal profile of nature topics. It gives sustainability teams the “political leverage” needed to promote internal investments and board-level action.
- Identifying blind spots: One-third (33%) of companies value engagement because it provides external advice and helps identify potential “blind spots” in their current risk management.
- Understanding preferences: Engagement helps firms (17%) better understand the specific nature-related preferences of their shareholders and allows them (12%) to explain their long-term resilience strategies in a broader context than just immediate financial returns.
The reputation factor
The reputation effect is a significant channel through which nature-related risks can lead to financial consequences for a company: 20% of companies exposed to nature transition risks rank reputational effects or a potential loss of their “license to operate” as one of the top two ways these risks financially materialize,. Beyond its direct impact on firms, reputation is also a primary driver for investor behavior; half of all surveyed companies believe that reputation concerns are a leading motivation for investors to engage in nature-related stewardship activities.
For companies with transition risk exposure, the most important sources of nature-related financial effects are their own products and services (66% rank this channel in the top, followed by nature effects on their own operations (59%), effects from supply chains (35%), reputational effects or a loss of the “license to operate” (20%), and effects from changes in investor demand (15%).
The persistence of the ‘valuation gap’
Despite this strategic influence, a critical disconnect remains in how these risks are quantified. While 40% of companies believe investors consider nature risks, fewer than 25% think investors actually assess how these risks affect fundamental metrics like cashflows or costs of capital.
This suggests that while engagement is successfully driving operational changes and risk awareness, the market is still in the “nascent stage” of developing robust quantitative models to price nature into financial valuations.
The path forward
Nature risk is a financially material reality that 48% of firms already recognize as significant to their business. As investors increasingly view nature and climate as “coupled” crises that cannot be separated, the pressure to move from mitigation to active restoration will likely intensify.
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