The UN Environment Programme (UNEP) and S&P Global Sustainable1 have announced the launch of the Nature Risk Profile, a new way to look at how companies affect nature and how much they depend on it.
The Nature Risk Profile aims to give the financial sector a way to measure and deal with risks related to nature. It does this by providing scientifically sound and actionable analytics on how nature affects and is affected by the economy.
Since nature is a big part of half of the world’s GDP, business leaders are becoming more worried about biodiversity loss. According to the 2023 Global Risks Report from the World Economic Forum, biodiversity loss is the fourth most serious global risk over the next ten years, after failing to act on climate change, adapting to climate change, and extreme weather. So, market participants need a credible, quantitative way to measure their operations’ and portfolios’ impact and dependencies on biodiversity, reduce risks, and promote nature-positive outcomes to build resilience.
The new method includes metrics and data that help companies and investors find and measure their exposure to natural events. The methodology looks at several key areas, such as the risks that come from how companies affect biodiversity, the risks that come from how companies depend on biodiversity, and the risks that could come from being close to areas with a lot of biodiversities.
After the Kunming-Montreal Global Biodiversity Framework was implemented in December 2022, the Nature Risk Profile method was implemented in January 2023. The Global Biodiversity Framework aims for governments to take legal, administrative, or policy steps to encourage and allow businesses to regularly monitor, assess, and be open about their risks, dependencies, and effects on biodiversity. Governments also agreed that these rules apply to all large companies and financial institutions, domestic and international, as well as their operations, supply and value chains, and portfolios.
The Nature Risk Profile method can potentially have a big effect, changing financial decisions. Experts made it from the conservation, business, and finance fields. It fits with the Taskforce on Nature-related Financial Disclosures’ (TNFD) new approach and will help put the disclosure framework into place.
The method lets users combine information about a company with best-practice data about nature to figure out important risk metrics. It uses strong, science-based tools to measure impact and dependence, such as the Exploring Natural Capital Opportunities, Risks, and Exposure database and the developing Ecosystem Integrity Index.
S&P Global Sustainable1 has also started a new knowledge community where investment managers, insurers, businesses, non-profits, and other groups can work together to improve the method and speed up the capital shift toward good outcomes for nature. This pilot programme will help put the TNFD framework into practice by combining geospatial biodiversity datasets by the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) and its partners with detailed information about local business activities from S&P Global.
