S&P Global Sustainable1 has today launched Nature & Biodiversity Risk, a new dataset assessing nature-related impacts and dependencies across a company's direct operations that can be applied at the asset, company and portfolio level.
This new dataset will support companies, investors and entities as they seek to understand, manage and mitigate exposure of corporates and portfolios to nature related risks and impacts.
Nature & Biodiversity Risk can be accessed through S&P Capital IQ Pro and covers over 17,000 companies and over 1.6 million assets and provides a number of new nature-related risk metrics including a dependency score and ecosystem footprint measure enabling greater understanding of a company or asset's dependency and impact on nature. The dataset applies the Nature Risk Profile, a new methodology for analyzing companies' impacts and dependencies on nature, launched by S&P Global Sustainable1 and the UN Environment Programme (UNEP) in January this year.
Thomas Yagel, Chief Operating and Product Officer, S&P Global Sustainable1 said:
"From the launch of the Taskforce on Nature Related Financial Disclosures (TNFD) in 2021 to the significant commitments made at COP15, there is an increasing demand from companies and investors to be able to quantify both their dependency on nature and the impact of their operations on location-specific ecosystems."
The dependency score* considers the level of reliance that a business' direct operations have on 21 different ecosystem services, as well as the expected resilience risk of the ecosystem providing these services, where these businesses are operating around the world. The dependency score is on a scale from 0 to 1.0 (where 0 represents no dependency risk and 1.0 represents very high dependency risk).
The Ecosystem Footprint** measures a business' direct operational impact on nature and biodiversity. This metric combines three key areas of analysis: the areas of land impacted by the company (land area), the degree to which the location-specific ecosystem integrity is reduced (ecosystem degradation) and the significance of the location-specific ecosystem impacted (ecosystem significance).
Steve Bullock, Global Head of Research and Methodology, S&P Global Sustainable1 said:
"Our research shows that 85% of the world's largest companies have a significant dependency on nature, indicating the critical importance of greater transparency for market participants on nature-related risks and opportunities. This new dataset signals a maturation of the conversation on nature and provides clear metrics quantifying the nature related dependency and impact of over 1.6 million global real assets."
Applying this new dataset to the S&P 1200, the world's largest public companies, our analysis shows that:
85% of the world's largest companies have a significant dependency* on nature across their direct operations.
46% of the world's largest companies have at least one asset located in a Key Biodiversity Area (KBA)*** that could be exposed to future reputational and regulatory risks.
S&P 1200 companies used an estimated 22 million hectares of land for their direct operations in 2021 to generate USD 28.9 trillion revenue.
Expressed as an ecosystem footprint, this is equivalent to fully degrading 2.2 million hectares of the most pristine and significant ecosystems globally, such as the most intact and biodiverse parts of the Amazon or Sumatran rainforests.
The dataset can be leveraged by market participants to understand their nature-related risks and more transparent alignment with Taskforce on Nature-related Financial Disclosures (TNFD) recommendations. The dataset is aligned with the LEAP risk and opportunity assessment approach, as recommended by the TNFD.
Dependency score methodology note:
*The dependency score considers the level of reliance that a business has on 21 different ecosystem services, as well as the expected resilience risk of the ecosystem providing these services, where these businesses are operating around the world. Significant dependency is signified by companies that have a dependency score over 0.6 (where 0 represents no dependency risk and 1.0 represents very high dependency risk).
Ecosystem footprint methodology note:
** In order to provide a decision-useful metric that enables comparison between business operations, land area, ecosystem integrity degradation and ecosystem significance are brought together to calculate the equivalent impact on the most significant areas globally in terms of biodiversity conservation and ecosystem services provision. This produces an Ecosystem Footprint expressed as the equivalent number of hectares in the most globally significant ecosystems that would be fully degraded by the company's operations.
Key Biodiversity Area note:
***KBAs are sites contributing significantly to the global persistence of biodiversity (International Union for Conservation of Nature [IUCN], 2016). KBAs are identified at the national, sub-national or regional level by local stakeholders based on standardized scientific criteria and thresholds.