Axios Pro Exclusive Content

Investors home in on natural-asset risk

Jul 6, 2022
Illustration of a floatation device lifesaver wrapped around a tree

Illustration: Annelise Capossela/Axios

Investors face another potential risk in their investment portfolios — nature-based impacts and dependencies.

Why it matters: Climate change will have an increasingly large negative impact on natural assets, and investors are starting to write those risks into portfolios.

What's happening: Financial institutions are assessing nature-based impacts and dependencies — such as biodiversity changes that affect a company's land holdings — as part of an ongoing assessment of risk and adaptability in a changing climate, a Moody's ESG Solutions report states.

  • The group's Controversies Risk Assessment Screening identified 540 current cases of negative business impacts stemming from such concerns.
  • Expectedly, the most at-risk industries are mining and metals, food and energy.

Yes, but: "Measuring progress around biodiversity still presents several challenges," Jimmy Greer, Moody's ESG Solutions vice president of analyst outreach and research, writes in the report.

  • Data collection and standardization remain the biggest challenge, as is the case for other elements of ESG disclosures and reporting.
  • A Taskforce on Nature-related Financial Disclosures assessment found more than 3,000 different nature-related metrics used across financial institutions.

The bottom line: The sprawling world of ESG disclosures is only broadening into a rapidly moving business target ahead of the SEC's adoption of proposed rules.

Go deeper