- Companies increasingly face new threats from “natural capital” depletion, such as higher costs from resource scarcity, regulatory action, as well as pressure from communities and wider society
- Allianz industry-specific analysis of 2,500+ companies finds oil and gas, mining, food and beverage and transportation sectors have highest natural capital risk exposure
- Against a backdrop of growing stakeholder pressure around sustainability, a key challenge for businesses is to measure and manage their natural capital impact and dependency
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Natural Capital Risk Analysis by Industry Sector
In a new report, AGCS analyzes data from research provider MSCI ESG Research, covering more than 2,500 companies, in order to assess the natural capital risk exposure in 12 industries. The oil and gas, mining, food and beverage and transportation sectors rank highest in terms of risk exposure, based on five factors – biodiversity, greenhouse gas (GHG) and non-GHG emissions, water and waste. All are classified as being in the "danger zone", meaning the natural capital risks businesses face are, on average, greater than the mitigation options currently employed.
Companies in the oil and gas and mining sectors have a high level of natural capital risk exposure due to the nature of their business. For example, in the mining sector, over 90% of global iron ore production is derived from areas that have a high risk of water stress and biodiversity impact1. The transportation sector also falls into the “danger zone” because of its biodiversity impact and GHG and non-GHG emissions. Transportation-related carbon emissions have increased by 250% since 1970 and now account for 23% of all global emissions2, so there is room for further steps to be taken by the sector, such as emissions control or mitigation measures to reduce the impact on flora and fauna, the report says.
“Sectors with an inherent natural capital footprint often provide the necessary resources for manufacturing or other industries, so it’s obviously harder for companies who operate in them to mitigate their natural capital risks. However, innovative risk solutions to reduce the stress to the environment could be more strenuously applied,” says Bonnet.
The three phases of natural capital risk
Managing Natural Capital Risk
However, balancing risk management focused on today with the management of emerging risks is challenging. Future and non-financial risks can easily be overlooked as companies focus on short-term targets. It can be difficult to measure, quantify and monetize these risks. Yet in future it is expected that companies will have to actively disclose their natural capital risk exposure to governmental agencies and investors, as standards evolve.
“With threats to the environment coming from many different areas, there will be no such thing as business as usual in the future,” says Bonnet. “Companies need to understand, quantify and even monetize their dependence on natural capital and the impacts their operations have on it to ensure their organizations are resilient and future-proof.”
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About Allianz Global Corporate & Specialty
Allianz Global Corporate & Specialty (AGCS) is a leading global corporate insurance carrier and a key business unit of Allianz Group. AGCS provides risk consultancy, Property-Casualty insurance solutions and alternative risk transfer for a wide spectrum of commercial, corporate and specialty risks across 12 dedicated lines of business.
Our customers are as diverse as business can be, ranging from Fortune Global 500 companies to small businesses, and private individuals. Among them are the world’s largest consumer brands, tech companies and the global aviation and shipping industry, but also wineries, satellite operators or Hollywood film actors. They all look to AGCS for smart answers to their largest and most complex risks in a dynamic, multinational business environment and trust us to deliver an outstanding claims experience.
We constantly strive to deliver the best for our customers through our global team of around 4,400 employees from over 70 nationalities in 34 countries worldwide. As the one of the largest Property-Casualty units of Allianz Group, we are backed by strong and stable financial strength ratings and a global network in over 200 countries and territories. In 2018, AGCS generated a total of €8.2 billion gross premium worldwide.