Biodiversity & Nature: Biodiversity footprinting
The risk associated with nature is evolving into an increasingly pressing global concern. In the World Economic Forum’s Global Risks Perception Survey (WEF, 2023), 6 out of 10 issues were environmentally related over a 10-year period. Importantly, in September 2023, the final Taskforce on Nature-related Financial Disclosures (TNFD) Recommendations were published. This marks a significant milestone in understanding the interdependencies between nature and business.
Brunel’s pilot project with S&P Sustainable (S&P) on nature-risk profiling of our aggregated listed portfolios has now been completed. The methodology used by S&P has been designed to align with and support the TNFD, which Brunel has committed, in principle, to use to shape its reporting in the future.
The analysis focused on three main pillars.
Impact on nature – understanding the ways in which a company’s activities and operations may have a positive or negative impact on nature
Dependencies on nature – identifying the ways in which a company depends on nature to operate
Double materiality – considering both the impact of a company on nature (inside-out) and the impact of nature on the company (outside-in).
The headline results from our nature-risk profiling are:
A substantial portion of land-use within our listed portfolios is not located in a Key Biodiversity Area or Protected Area. However, those that are in these areas represent 77% of the value of our holdings.
The direct operations of our listed portfolio holdings exhibit a low level of ecosystem degradation and occupy a lower level of globally significant biodiversity areas than our benchmark by 28%.
We have an investment-weighted exposure of 85% to companies that have a significant dependency on ecosystem services.
Our next steps are to map the various nature impacts and dependencies to understand and manage risk. We aim to engage with companies in our selected portfolios who are either causing the most impact or have potentially high investment risk arising from deteriorating ecosystem services.
