Identifying dependencies and impact drivers

AMC, an asset management company, integrated environmental, social, and governance (ESG) risks into its portfolio, particularly for food consumer goods. Using ENCORE, AMC identified soy’s high dependency on ecosystem services like flood and storm protection, erosion control, and groundwater provision. These ecosystem services were assessed as having “Very High Materiality” for soy, signalling critical risks if disrupted. Furthermore, impact drivers associated with large-scale soy production, such as freshwater and terrestrial ecosystem use and water consumption, indicate potential risks of depletion in specific geographies.

Identifying company sourcing locations for soy production

AMC leveraged tools like Trase and direct engagement with investees to track soy sourcing locations within its portfolio. A significant portion of soy, a known deforestation driver, was traced back to Brazil, with notable sourcing from Sinop, Mato Grosso. This allowed AMC to map exposure risks associated with soy supply chains and the environmental impacts of these sourcing practices.

Identifying hotspots of natural capital depletion

AMC used ENCORE to pinpoint hotspots of natural capital depletion in Brazil, particularly in the Amazon basin and West Central regions. These areas showed high rates of soil, sediment, and biodiversity depletion, which are critical to ecosystem stability. The Sinop region was highlighted as an area of concern due to overlapping depletion risks across multiple natural assets, raising potential operational and reputational risks for AMC’s portfolio companies involved in soy production there.

Comparing company location sourcing with natural capital hotspots of depletion

By aligning soy sourcing data with natural capital depletion maps, AMC identified locations where companies might be operating in high-risk environmental areas. This insight enabled AMC to initiate discussions with companies regarding sustainable practices and risk mitigation, focusing on hotspots of depletion in Brazil.

Refining an engagement strategy

AMC crafted a dual-layer engagement strategy. Direct engagement focused on promoting better supply chain traceability, adherence to sustainability standards like the RTRS Standard for Responsible Soy, and improved governance around ecosystem impacts. Indirect engagement involved participation in initiatives like the ABIOVE Soy Moratorium and the Principles for Responsible Investment (PRI) to advocate for responsible sourcing and combat deforestation. AMC also aligned its strategy with broader environmental goals, such as Brazil’s Low Carbon Emission Agriculture Program.

Other resources

AMC leveraged additional tools like Trase Finance and IBAT to strengthen its assessment of environmental risks. Trase Finance links deforestation-related commodity trade to financial markets, while IBAT assesses biodiversity impacts against global standards, supporting AMC’s broader ESG objectives.

This structured approach allowed AMC to systematically address natural capital risks within its portfolio, emphasising sustainable soy production and broader alignment with global environmental standards.