The corporate sector’s embrace of ecosystem considerations is one of the most promising means of achieving the Sustainable Development Goals, while also reducing risks and providing new opportunities for companies, investors, lenders and insurers.
A recent review by UN Environment Programme’s partnership, the Landscapes for People, Food and Nature Initiative, identified 365 programmes around the world that are using an integrated approach to landscape management, including many private sector ventures.
A new report, ERISC Phase II: How food prices link environmental constraints to sovereign credit risk, encourages governments, investors, credit rating agencies and banks to work together to further investigate the linkages between environmental risks and economic and socio-political impacts, and to better integrate this information in country risk assessments and investment decisions. The aim of the ERISC project is to identify and quantify the impact of environmental risks such as deforestation, climate change and water scarcity on national economies. By assessing the impacts on key macroeconomic indicators such as GDP, current account balances or inflation, the research enables financial institutions to integrate environmental risks in their investment decision-making.
How does UNEP do this?
UNEP works with the private sector to build the business case for healthy and productive ecosystems, through:
- Advocacy to persuade companies to quantify their risk exposure to environmental impacts with a view to reducing costs (e.g. water scarcity or deforestation can affect a company’s earnings);
- Practical tools and capacity building for integrating natural capital factors into loan, bond and equity products (e.g. the Water Risk Valuation Tool for stocks and the Corporate Bond Water Risk Credit Tool for corporate bonds); and,
- Financial planning for integrated ecosystem management at the country level (e.g. identification of opportunities for private sector financing of integrated landscape management).