UNEP, S&P Global Launch New Nature Risk Profile Methodology

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by KnowESG,

S&P Global Inc.

2021-10-20 SustainableFundAward-1200x675-v2

The UN Environment Programme (UNEP) and S&P Global have rolled out the Nature Risk Profile, a new methodology for analysing companies' environmental impacts and reliance.

The goal of the Nature Risk Profile is 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 nature impacts and dependencies.

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 World Economic Forum's 2023 Global Risks Report, biodiversity loss is the fourth most serious global risk over the next ten years, behind climate action failure, climate change adaptation, and extreme weather.

So, market participants need a reliable, quantitative way to measure the impact and dependencies of their operations and portfolios 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 arising from companies’ dependencies on biodiversity, and potential risks via proximity to biodiverse areas.

The governments also agreed that these requirements apply to all large and international corporations and financial institutions, as well as their operations, supply and value chains, and portfolios.

The Nature Risk Profile method has the potential to have a big effect, changing the way financial decisions are made. Developed by experts from across the conservation, business, and finance communities, it aligns with the emerging approach of the Taskforce on Nature-related Financial Disclosures (TNFD) and will support the implementation of TNFD’s disclosure framework.

The method lets users combine information about a company with best-practice data about nature to figure out important risk metrics. It is built around using powerful, science-based impact and dependency measurement tools, including the Exploring Natural Capital Opportunities, Risks and Exposure database and the developing Ecosystem Integrity Index.

S&P Global Sustainable1 has also created a new knowledge community, encouraging investment managers, insurers, businesses, non-profits, and others to contribute ideas to expand the approach and accelerate capital shifts toward nature-positive outcomes.

This pilot programme will aid in the practical implementation of the TNFD framework process by combining geospatial biodiversity datasets curated by the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) and partners with S&P Global's detailed knowledge of local business activities.

Neville Ash, Director of UNEP-WCMC, said: “The methodology provides a major step forward to deliver the actions required for transformative change and support the finance sector’s critical contribution to delivering the ambitions of the Kunming-Montreal Global Biodiversity Framework. This methodology links science, policy, and finance to bring nature to the heart of financial decision-making. Working with a global financial data provider like S&P helps test the method by using their data on thousands of financial and corporate assets that is specific to a certain location. In developing and sharing this methodology as a public good, we are supporting the TNFD in implementing a common and harmonised approach to nature-related risk management within the finance sector.”

"Against the backdrop of net zero commitments from investors and companies, net zero for climate must be net positive for nature in line with the important work of the TNFD," said Dr. Richard Mattison, President of S&P Global Sustainable1. "The development of this new methodology will be key to unlocking better understanding, analysis, and action around nature-related risks for companies and investors. The methodology will be open to the public, with stakeholders developing and refining it to support transparency and adoption."

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Source: UNEP

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