S&P releases biodiversity and nature risk dataset

May 19, 2023|Written by Ingrid Walker|Bundesbank

S&P Global has launched a nature and biodiversity risk dataset that can be used by central banks to assess the financial risks caused by ecosystem decline. Research conducted using the dataset found that 85% of the world’s biggest companies depend significantly on nature for their operations.

Developed by the company’s ESG-focused arm, Sustainable1, the dataset covers 17,000 companies and 1.6mn assets, and generates common metrics that can be used to assess the impact and dependencies of companies on nature-related services.

The software provides users with two risk metrics: an ecosystem footprint measure and a nature dependency score.

The dependency score measures the level of risk associated with a company’s reliance on 21 different ecosystem services, such as erosion control and flood and storm protection. The ecosystem footprint captures businesses’ direct impact on nature and biodiversity.

S&P analysts found that the world’s biggest public companies used an estimated 22mn hectares of land for their direct operations in 2021 to generate US$28.9tn in revenue. Expressed using S&P’s ecosystem footprint methodology, this equates to fully degrading 2.2mn hectares of the most pristine and significant ecosystems globally.

Steve Bullock, head of Sustainable1’s research and methodology, said the results show the “critical importance of greater transparency” on nature-related risks. He added that the dataset “signals a maturation of the conversation on nature” by providing clear metrics that are aligned with the Taskforce on Nature-related Financial Disclosures recommendations.

The platform was announced in the same week that a senior Deutsche Bundesbank executive, Sabine Mauderer, called for a single metric to capture biodiversity risk.

Mauderer, who is also vice-chair of the Network for Greening the Financial System, said if financial institutions continue to ignore nature-related risks, losses and asset devaluation that hurt banks’ risk profiles and profitability could follow. She cited World Bank estimates that if certain ecosystem services were to collapse, global GDP could decline more than 2% annually by 2030.

She added that there is an “urgent need for further research” on how biodiversity loss impacts the financial system. Without this, Mauderer said financial supervisors will find it “hard to do their job properly” and fulfil core mandates.

This page was last updated May 18, 2023

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