In order to navigate the impact of biodiversity loss on the finance sector but equally the impact of the finance sector on biodiversity, it is recommended that financial institutions start by prioritising the sectors and geographies within their business to which there is greatest exposure and tackle them one-by-one. Unlike climate, biodiversity impact (and therefore risk) varies widely across the globe, and therefore financial institutions will require companies to provide geospatial data where possible.
The Natural Capital Finance Alliance with Global Canopy, for example, recommends target-setting in the following priority sub-sectors:
- Agricultural Products
- Apparel, Accessories & Luxury Goods
- Electric Utilities
- Independent Power Producers & Energy Traders
- Oil & Gas Exploration & Production
- Oil & Gas Storage & Transportation
PwC has highlighted the following industries in order of importance for dependencies on nature directly and via supply chains:
SASB’s materiality map also provides a basic guide to the key sectors that should be the focus with regard to natural capital risk. For example, it lists ecological impacts as being likely to be material for more than 50% of the extractive and minerals processing sector.
A sector-focus would also be useful in the establishment of biodiversity working groups. In the same way financial institutions and corporations have formed coalitions or taskforces to speed up learning around the decarbonisation of specific sectors (fashion, shipping, energy), sector-specific collaboration and shared learning with regards to nature-based risk are needed. Better still, current sector-specific alliances targeting net zero should expand their remit to include nature-positive targets. [see Recommendation 9]
For a pdf of the full report click here.
RECOMMENDATION IN PRACTICE:
Understanding Sector Risk: BNP Paribas Asset Management
BNP Paribas Asset Management (BNPP AM) is working to improve its understanding of the breadth of its nature-related risk exposure to provide its portfolio managers with actionable insights. BNPP AM conducts ESG sector reviews to bring its portfolio managers up-to-speed on the latest risks and opportunities. These reviews cover a wide range of sustainability issues, from human rights to nature loss, highlighting our view of the leaders and laggards in each sector. BNPP AM has also contributed to case studies, in partnership with the Capitals Coalition and others, to explain its approach, looking at its dependencies or impacts in key sectors, including a study on seafood and plastics in the consumer sector.