Biodiversity is the foundation of global economic activity: from food and water to health, energy, and supply chain resilience. Yet as biodiversity loss is accelerating at an unprecedented pace, creating material financial risks, operational vulnerabilities, and systemic threats across markets, many companies and investors struggle to develop mitigation strategies that are accessible, resource-efficient and scalable. We believe that segregating risk and impact assessments and focusing on the underlying drivers of biodiversity loss enables a more effective approach.
Executive Summary
- Biodiversity is mobile, silent, and invisible. Identifying, quantifying and tracing impacts on biodiversity is complex. Often, harms to biodiversity only become visible when already severe.
- The direct links between company operations, products, or services and biodiversity are often hard to trace, but over time the environmental impacts of our economic activities can alter the biodiversity that underpins the economy.
- Investors need a practical approach for addressing biodiversity as an integral part of their investment process.
- We propose a pragmatic approach that differentiates between:
- Idiosyncratic risks: companies and assets with specific biodiversity-related risks that need to be addressed at the company- or asset-level.
- Systemic risks: companies and assets whose economic activities contribute to biodiversity-related systemic risk that need to be addressed from an environmental impact perspective.
We believe that segregating risk and impact assessments can help companies and investors deploy their resources effectively.
It will be each individual company’s and investor’s choice as to whether they look at biodiversity purely through a financial materiality lens, or to adopt a broader scope that addresses systemic environmental issues, which will require a focus on the environmental impacts of their activities or investments.
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- Providing Investors with Clarity
- A More Practical Approach for Investors
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