Introduction

This report provides a quantitative assessment of corporate biodiversity risk exposure and responses. From an analysis of 11,812 companies, this study finds that despite increased awareness of biodiversity loss posing significant risks to the global economy, around $7.2tn of total enterprise value remains exposed to unmanaged biodiversity risks.

Background

The study draws on the natural-resource-based view (NRBV) of the firm, where companies adopt a strategic response to biodiversity risks for long-term competitive advantage. The report highlights the significance of economic dependency on natural capital and potentially catastrophic consequences should biodiversity be lost or degraded.

Biodiversity risk exposure and response

The study notes 29% of companies had adopted biodiversity policies by 2018, but the responsiveness of companies to material biodiversity dependency risks is poor. The paper identifies a gap in adoption of biodiversity policies in companies exposed to biodiversity risks and highlights the need for a more strategic response.

Key findings

Companies in sectors with material impacts on biodiversity tend to have high levels of response, but a significant number of firms, including those in the natural resources and oil and gas extraction sectors, have no response. This finding is despite the fact that financial institutions are increasingly aware of the implications of biodiversity loss and the growth of the responsible investment movement.

Conclusion and recommendations

The report concludes that improved corporate biodiversity policies and management practices, particularly in sectors with high exposure to biodiversity risks, are essential to mitigate the significant economic threat that biodiversity loss poses. Additionally, the report calls on firms to adopt and disclose specific policies on biodiversity risk management. Finally, it encourages financial institutions to incorporate biodiversity risks into their investment processes.

ESG issues

The report identifies a significant environmental risk with material impacts on the broader societal and governance risks posed by biodiversity loss, which threaten the long-term economic sustainability of companies. The report recommends that companies, particularly those in sectors with high exposure to biodiversity risks, improve their policies and management practices and adopt specific policies on biodiversity risk management. Additionally, financial institutions are encouraged to incorporate biodiversity risks into their investment processes.