How can I manage the business risks from biodiversity issues?
Maintaining access to capital
The financial sector is developing increasingly sophisticated approaches to managing financial and other risks related to the social and environmental impact of investments. Although subjects such as climate change and human rights have tended to dominate this agenda until recently, biodiversity issues are now gaining a higher profile and are likely to become another important determinant of access to capital.
IFC funding is dependent on meeting relevant Performance Standards (PDF, 395kb) that incorporate a number of measures aimed at biodiversity conservation. In the project finance sector, these performance standards are now being mainstreamed via adoption of the Equator Principles by leading private sector banks such as Rabobank, Citibank, Standard Chartered and ABN Amro. Some of these Equator banks, such as Citigroup, have also developed additional or more detailed lending policies related to forest resources and biodiversity.
Environmental and social issues, including biodiversity, are also an increasingly important factor for institutional investors and equity analysts. At one end of the spectrum, socially responsible or "ethical" investors may include biodiversity-related issues in their negative and/or positive screening frameworks or "best in class" analytical approaches. At the other end, mainstream financial institutions such as Goldman Sachs are integrating social and environmental issues into their equity research and investment strategies, recognizing that such issues can influence long term financial performance and need to form part of an enhanced analytics approach. Insight Investment is one of several fund managers to place a particular focus on biodiversity issues.
Stock exchanges are also responding to social and environmental issues. In 2003, South Africa's Johannesburg Securities Exchange became the first market in the world to require listed companies to comply with corporate governance and sustainability reporting standards. The São Paulo Stock Exchange, Bovespa, launched a sustainability index in 2005. Internationally, similar indices include FTSE4Good and the Dow Jones Sustainability Indexes.