Overview
In ESG investing (Environment, Social, Governance), the center of "E (Environment)" has been "climate change (decarbonization)," but in recent years
"biodiversity" is rapidly becoming a major theme.
Institutional investors are beginning to view biodiversity loss as a "systemic risk (risk that could collapse the entire market)" and are strongly demanding transition strategies toward Nature Positive and risk disclosure from investee companies.
Theoretical Background
The Spread of "Double Materiality"
The definition of what information is important (material) for investment decisions is expanding.
- Single Materiality: Impact of environment on the company (e.g., factory stops due to flooding). Financial impact only.
- Double Materiality: Impact of the company on the environment (e.g., deforestation) is also valued. Centered on the EU, the idea that this "bidirectional impact" should be disclosed and managed is becoming standard.
Detailed Explanation
Investor Movements
An initiative by institutional investors to collectively engage (dialogue and demand) with 100 major companies that have significant impact on biodiversity loss. Companies selected here risk divestment (withdrawal of investment) if they respond poorly.
Bonds whose use is limited to environmental conservation activities. Issuance is increasing as a means to raise funds for biodiversity conservation projects.
Rating Agency Evaluation Criteria
ESG rating agencies such as MSCI and CDP are also increasing their biodiversity-related questions.
- Do you have a zero-deforestation policy in your supply chain?
- Are you conducting water risk assessments?
- Are you conducting biodiversity impact assessments?
Low scores on these mean that massive money from pension funds and similar sources won't come in.
Critical Examination
Data Reliability
Data used to calculate ESG scores largely depends on corporate self-reporting, risking high ratings based on "narrative" alone that is far from reality.
A transition to evaluation based on real field data (primary data) is needed.
What IKIMON Can Do
IKIMON is a
unique tool that connects "S" and "E" in corporate ESG evaluation.
- E (Environment): Improving environmental scores through biodiversity data acquisition and disclosure.
- S (Social): Community contribution and employee engagement improvement through citizen science events involving local residents and employees.
Because we can provide "actual field measurement data" and "citizen participation track record" together rather than "desk calculations," it becomes evidence of ESG activities that is convincing to investors (not greenwashing).
References
- CDP. Biodiversity: The new frontier in ESG.
- Nature Action 100. Investor Expectations for Companies.
