Investors home in on natural-asset risk
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.