Biodiversity risk by the numbers
Alternative Energy leads in biodiversity risk incidents, Brazil experienced most severe risk incidents
# February 2022
Protection of biodiversity is key to a healthy planet and a healthy economy – and with the UN Sustainable Development Goal No. 15 aiming to prevent land degradation and biodiversity loss, this objective is at the forefront for public and private market participants.
However, in the past two years alone, 35% of companies (approximately 23,000) and 64% of projects (approximately 15,000) in RepRisk’s dataset have been linked to a biodiversity1 risk incident.
With this in mind, we took a closer look at what our data reveals about the issue of biodiversity.
First up: countries with the most biodiversity risk incidents in 2021.
Of ten locations with the highest count of biodiversity risk incidents in 2021, Indonesia and Mexico see the most biodiversity risk, proportionally, while risks of this category are most severe in Brazil.
The above graph illustrates the percentage of a country’s total risk incidents that are related to biodiversity. Indonesia has the highest percentage of biodiversity risk incidents – more than half of total ESG risk incidents in the country. Indonesia contains the world's third largest area of rainforest, and is credited as being the most species-rich country on earth.2 That includes 68 critically endangered species, and 69 endangered species, and 517 vulnerable species. The country with the most severe risk incidents is Brazil, which has the most rainforest in the world.
Second: sectors with the most biodiversity risk incidents.
The majority of risks in the highlighted sectors have far−reaching environmental and social consequence. Biodiversity risk soared in Alternative Energy in 2021 with biofuel links to deforestation and monoculture farming.
In 2021, the Alternative Energy sector records the most biodiversity risk incidents – driven by biofuel that is linked to deforestation and monoculture farming – followed by Mining and Utilities on second and third rank.
Two headlining issues with biodiversity are endangered species and deforestation. It would be incorrect to conclude that countries such as Indonesia, with superlative amounts of wildlife rainforest, are the only countries vulnerable to ESG risks related to biodiversity. As the following time lapses on endangered species and deforestation risk incidents illustrate, biodiversity risks can, and indeed do, occur worldwide.
Occurrence of ESG risk incidents related to endangered species is widespread, with severe incidents common in locations with high proportions of protected land and marine area. Occurrence of ESG risk incidents related to high conservation value forests, forest burning, and palm oil production remains common in high deforestation countries such as Indonesia and Brazil.
Biodiversity runs a spectrum of risk incidents and has complex consequences, for example:
Apparel company supply chain issues are often linked to deforestation and ecosystem destruction.
Mines and dams carry the risk of damaging protected wildlife areas and endangered species.
Bioenergy companies face criticism of the ecological and social impacts of biofuels.
Thus, ESG risk incidents related to biodiversity not only negatively impact animals and ecosystems – but also lead to bottom-line financial, compliance, or reputational impacts on the implicated companies.
Biodiversity must be a key consideration in comprehensive ESG due diligence and risk management processes. While it can be a challenge for investors and others to identify, assess, and mitigate biodiversity related risks in a timely and actionable way, RepRisk is uniquely positioned to solve this challenge.