Do you already know what your organization’s affect is on the rainforests? Have you labored out what dangers water shortage may pose to your future operations? Have you advised traders the place and the way your organization – and its provide chain – relies on nature? These are some of the huge questions firms shall be asking themselves in the close to future – in the event that they aren’t already. These are the questions your traders are going to need the solutions to as the ESG highlight falls on biodiversity.
Last 12 months, Norges Bank Investment Management, supervisor of the world’s largest sovereign wealth fund and holder of an common 1.4 p.c of all the world’s listed companies, revealed an expectation doc on biodiversity.
The mega-investor says it ‘expect[s] companies to be transparent on how they depend on and impact biodiversity and ecosystem[s]’. Firms which might be ‘highly dependent on or impacting biodiversity and ecosystems should integrate relevant nature-related considerations into their corporate strategy, risk management and reporting,’ it provides.
Then there’s Robeco’s local weather survey, launched in March this 12 months, which finds that investor consciousness of biodiversity is quickly growing and has greater than doubled, from solely 19 p.c of traders saying that biodiversity was a major issue of their funding coverage two years in the past to 41 p.c in the present day.
Around the world, firms are taking notice. Nick Mazing, director of analysis at Sentieo, says the time period ‘biodiversity’ is rising each in transcripts and in proxy statements. ‘In 2021, there were 58 proxies containing the word, compared with 29 in 2020, 22 in 2019 and just 13 and 11 in 2018 and 2017, respectively,’ he explains.
‘Biodiversity is also growing as a topic on conference calls, with more than 400 transcripts that mention the word in 2021, in contrast to just 42 in 2017.’ Mazing provides that high-profile CEOs are more and more commenting on the issue.
Karine Basso, director for agricultural worth chains at consultancy South Pole, says firms are more and more waking up to the concept that defending the pure assets they depend on, straight or not directly, is about future-proofing their companies.
‘Companies see the importance this has for their business continuity,’ she says. ‘We’ve seen it with the affect of local weather change, we’ve seen it with Covid-19, with the disruptions to provide chains – how issues can attain a degree of disruption that you wouldn’t have foreseen twenty years in the past.
‘From that perspective, this future-focus is not necessarily a focus on biodiversity for its own sake, but more about the idea that if you do not take care of the impact your business has on nature, and on making sure that nature is conserved to a level that you can continue your business, you will have an issue in the future.’
The precise reporting of biodiversity, Basso provides, is nearly a consequence of that means of pondering. Still, the issue is one that’s nearly too overwhelming for those who attempt to assume of it in big-picture phrases. We all depend on nature, on water, on the planet, and Basso says firms don’t all the time know the place to start. At the identical time, many are nonetheless making an attempt to get to grips with Scope 1, 2 and three emissions, carbon pricing and the highway to net-zero.
‘This is a topic that can seem a little daunting and companies will have different maturity levels,’ Basso admits.
But for those who’re actually ranging from scratch, she says the very first thing you want to do is ‘map your supply chain, map your activities as an organization to understand where your activities are located geographically, so you can begin to understand: if I’m sourcing from Africa, what are the biodiversity and ecosystems I’m tapping into? What are the actions I’ve? And what are the penalties of these actions?’
But she stresses that for many companies in the present day, it’s not needed to dive into the deep finish on biodiversity reporting.
Instead, it’s about understanding the place the dangers – and alternatives – lie. From that base of understanding, firms can broaden their knowledge, prioritize their focus and start to speak to traders about what they’re doing – even when issues are nonetheless at the early stage.
This is an extract of an article that was revealed in the Summer 2022 issue of IR Magazine. Click right here to learn the full article.