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Davide Parisse and Sissel Waage highlight the benefits of monitoring and reporting non-financial information, and the risks involved when only measuring the ‘tip of the iceberg’.


“…In addition to climate-related issues, biodiversity loss and deforestation are also becoming more business relevant and risky — as they negatively affect natural capital, upon which business relies. Brand and regulatory risk increasingly loom in the months and years ahead on these issues, with growing likelihood of ROI-related implications for investments linked to biodiversity loss and deforestation. 

In response to these and numerous other ESG concerns, savvy institutions integrate into due diligence the data from the Integrated Biodiversity Assessment Tool (IBAT) as well as the WRI’s Global Forest Watch — as both are easily accessible online. Banks with cutting edge ESG review processes also consider biodiversity and ecosystem services (BES) impact assessments and mitigation plans, as the International Finance Corporation does based on its own Performance Standards (PS 6 (PDF)). More detailed quantitative KPIs related to natural capital also can be drawn from the Cross-Sector Biodiversity Initiative (CSBI) guidelines and natural capital accounting (NCA) approaches (such as the Natural Capital Protocol; the environmental profit & loss [EP&L] approach; Total Impact Measurement and Management [TIMM],TruCost and TrueValue [PDF]).

Leading financial institutions also can pinpoint geographies where assets are likely to be at risk of water stress, particularly where water demand outstrips water supply (insights on water risk from the World Resources Institute’s [WRI] Aqueduct Tool, the CDP’s Water Disclosure reports orCEO Water Mandate’s Water Stewardship Tool). 

Simply put, the best financial institutions in the world assess the ecosystem malfunction risk in ESG due diligence processes that are structured with quantification of financial risks and opportunities, based on robust guidance tools and data…”

Read on at: GreenBiz