$9.6 trillion in corporate risk over nature loss? What investors should know

Climate and greenhouse gas emissions have been on the forefront of risk and investor conversations across the environment but recently biodiversity and nature have been working their way into corporate commitments. And investors have began to take notice. Last month, a report on the credit implications of natural capital from Moody’s Investor Service clearly indicates that nature has landed on the institutional investor’s desk.

In 2020 the World Economic Forum reported that $44 trillion of economic value relies on nature. Moody’s September report put one other number to that value specifically specializing in the business community. It outlines $1.9 trillion in rated debt for nine sectors which have “high” or “very high” exposures to natural capital risks — and describes an extra 24 industries that moderately depend on nature-based capital as having a combined $9.6 trillion in rated debt.

Listed here are three things institutional investors and others within the business community should learn about nature-related risks from Moody’s report. 

1. Extractive industries are essentially the most in danger 

In keeping with Moody’s, the industries that depend on nature essentially the most are essentially the most in danger. Sectors similar to mining metals and other materials (excluding coal) had many businesses within the “very high risk” segment, in addition to the oil and gas industry. Ranching and agriculture is one other category that relies heavily on nature and thus is at “very high risk” if nature starts to deteriorate, Moodys’ said. Other at-risk sectors include forestry, fishing and tourism, that are integrated into natural ecosystems, along with construction businesses that depend on limestone as a constructing material. These businesses will either be on the frontlines of the battle to guard nature or its first victims. 

2. Measuring nature is difficult, so the regulatory frameworks will probably be complex

It could appear ridiculous to call measuring CO2 emissions easy, but once you compare it to the variability and nuances of natural assets, suddenly carbon looks like a chunk of cake. Greenhouse gases have an agreed-upon metric for tracking progress that is well measured: carbon within the atmosphere. And it has an easy goal everyone seems to be working towards: net zero.

Every industry must be ready for the time, resources and expertise it can require to judge nature.

Nature and biodiversity don’t. The Moody’s report points out that there is no such thing as a equivalent metric or goal for gauging risk or success on this space; each location is exclusive, and success or failure will look different. For instance, it’s harder to judge the return to a healthy habitat for a lake, river or forest; there isn’t only one metric for that. As a substitute, scientists would should aggregate many indicators including water quality, soil quality and the variety of species. Due to this fact the policies, methodologies and regulatory frameworks for measuring that success or failure will probably be much more nuanced and complicated than those for carbon emissions. My conclusion from reading this report: Every industry must be ready for the time, resources and expertise it can require to judge nature. 

3. Investors and businesses have to shift their mindset

The prevailing attitude towards operating a business previously was to “do no harm,” but because the climate crisis has turn out to be more acute, the main target has shifted to “actively doing good,” in line with the Moody’s report. Due to this fact, businesses and investors have to be working on solving the issues that they created, especially within the face of slow motion by governments, it concludes. As well as, investors and business leaders need to begin taking a look at the long-term health of the planet, not only the short-term outcomes of their businesses. Finally, in line with Moody’s, investments and company projects that enhance nature and impact biodiversity positively will probably be the longer term of excellent business. 

[Want to learn more about how climate tech can help us address the climate crisis? Check out VERGE 22 — the climate tech event — taking place Oct. 25-27, San Jose, CA.] 


Please enter your comment!
Please enter your name here