The Investors Can Assess Nature Now (ICANN) guide by First Sentier Investors is a five-step approach for sector and company-level assessments for nature and biodiversity with a focus on freshwater and forests. It is a toolkit that helps investors understand and leverage relevant data resources, foster collaboration, and enhance nature disclosures. It encourages targeted engagement discussions with investee companies, emphasising a flexible approach to assessing nature-related risks and exposure.

The guide explains why nature and biodiversity are important to both investors and investees. The key reasons include:

• Interconnectedness: There is an interdependent relationship between the health of nature and resilience of a business.
• Climate impact: Biodiversity and nature loss can exacerbate the effects of climate change.
• Resource dependence: Companies rely on nature for resources and services which can lead to supply chain disruptions if not managed sustainably.
• Regulatory risks: The guide highlights the growing regulatory risks, such as the EU’s ban on deforestation-linked products, emphasising the need for compliance.

The five steps of the assessment and engagement framework are:

Step 1: Identify Material Sector Exposures

• Identifies priority sectors, sub-sectors, and industries that are financially impacted by nature dependencies and impacts.
• Focuses on potential opportunities for organisations to contribute positively to nature.

Step 2: Company Prioritisation and Assessments

2a) Company Prioritisation:

• For freshwater, assess metrics like water usage, intensity, risk management, and discharges.
• For forests, evaluate land use, biodiversity efforts, deforestation commitments, and ESG data sources.
• Consider controversies for better context.

2b) Water Assessment Guidance:

• Evaluates water risk exposure and management in direct operations and the supply chain.
• Examines water sourcing, locations, and purpose.
• Develops a matrix to identify companies with higher water risk exposure.

Step 3: Company Engagement

• Establishes engagement objectives tailored to strategies and material exposure.
• Encourages companies to enhance understanding, set policies, and improve disclosure regarding water and deforestation issues.
• Emphasises corporate disclosure and transparency initially.

3a) Water Engagement:

• Inquiries about water policies, targets, and capital expenditure on water management.
• Assesses water consumption, discharge practices, monitoring, and pollutant disclosure.

3b) Deforestation Engagement Framework:

• Builds engagement based on assessments from Step 1 and 2.
• Aims to raise awareness and understanding of deforestation issues within companies.
• Utilises the Deforestation Engagement Framework’s five pillars: traceability, transparency, sourcing, monitoring, policies, and disclosure.

Step 4: Record-Keeping

• Highlights the importance of maintaining records to understand the approach and facilitate traceability.
• Emphasises the need for monitoring company performance and commitments.

Step 5: Escalation

• Advises investors on identifying and assessing nature or biodiversity incidents within a company and their associated risks.
• If necessary, suggests escalating matters by contacting the company in writing.

Overall, this guide provides investors with a structured approach to identifying nature and biodiversity-related risks, prioritising companies, and effectively engaging with them.

*Altiorem has conducted paid research for First Sentier Investors, and Stewart Investors, an FSI subsidiary, is Altiorem’s largest funder. 

1. This toolkit is for investors who are interested in assessing the nature-related impacts and dependencies of companies that focuses on forests and water. It provides the information, tools, and data for investors to start their nature-risk management journey.
2. This toolkit emphasises the need for investors to plan engagements with companies around their material impacts and dependencies on nature. The toolkit details resources that investors can use to identify material issues at a high level, particularly for water and forests.
3. FSI outline their approach to managing the ‘patchy’ nature data space, which provides clear strategies that investors can adopt to navigate some of the tool and data challenges that investors might face as they conduct their company assessments. Further resources are also provided that can be accessed directly from the report to help investors build their knowledge and skills.
4. Various case studies and tangible examples are integrated throughout the report to give users a clear understanding of how companies are managing their nature-related impacts and dependencies now. These case studies can also support investor engagement by providing concrete examples of initiatives that can be discussed with companies.
5. The toolkit contains frameworks for engagement on both water and forests. In addition, engagement questions are included that investors can use to inform their engagement with companies across a range of pillars including traceability and sourcing, monitoring, policies and pledges and disclosures.
6. Nature and biodiversity are terms that are often used interchangeably, but are not one and the same. Nature is defined by the TNFD as “the natural world, with an emphasis on the diversity of living organisms (including people) and their interactions among themselves and with their environment” and exists across four realms: land, ocean, freshwater and atmosphere.
7. Biodiversity is defined by the TNFD as “the variability among living organisms from all sources, including, inter alia, terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are part; this includes diversity within species, between species and of ecosystems”. Biodiversity can be thought of as a characteristic of nature, just as portfolio diversification is a characteristic of investment portfolios.