Investments’ Environmental Impacts on Ecosystems & Biodiversity

Ideally, the introduction should include:

What?

• What risk sector and impact are the note analyzing? i.e., Palm Oil, Rubber, Pulp & Paper, Fishing. Therefore, per typology of impact: deforestation, endangered species, droughts, soil infertility, overfishing, among others.

• Why is it important to discuss this commodity?

Where? When?

• The geographical context of where those activities are taking place. If the core analysis discusses the impact of a company regarding reforestation or ecological devastation in Indonesia, then the introduction should provide the context of the impacts that Indonesia has experienced specifically.

• Is it a recent issue? Is it a rooted phenomenon?

Quantifiers?

• For instance, if dealing with deforestation, how much money has been invested for the cultivation of forest products by the major banks in general?

• In this light, how much land is cleared every year in that country?

• What is the impact? In other words, how much is the commodity accounting in terms of ecological or biodiversity loss?

For example: “the palm oil sector is responsible for 2.3% of the world’s deforestation, which increases to 5% in tropical regions”4 or “Beef and soy production accounts for more than two-thirds of the recorded habitat loss in Brazil’s Amazon and Cerrado regions”5.

Note: Please note that all the above depends on data availability, retrievability, and relevance.

The core analysis should capture the company’s impact concerning the broader issue by providing the following information:

• How much money did the company provide through funding, investment, loans, underwriting, and/or credit? (2018-onward amounts, even aggregated, or previous years showing current impact).

• Both equity and debt financing can be considered as an investment, as long as the sum is over USD or EUR 100 million. Equity investments can be considered as long as it reaches a 5% holding.

• What main company(s) received the funds? You may discuss the companies activities that received the largest sums or have a large stake owned by the financial institution.

• How much is deforestation/biodiversity loss/habitat destruction linked to the company that received these funds?

• Alternatively, how much restoration or creation is linked to the company that received these funds? To avoid remediation, the analysis must consider the total net impact, i.e., reforestation efforts compared to total deforestation.

• What is the environmental impact of the activities that have taken place? How is the environment affected?

• Try to be as specific as you can: where is the ecosystem & biodiversity destruction or restoration taking place, and since when?

No matter what the company’s activities are, you may go back to the Logical Model if needed.

To help readers assess the impact scale and value, you should contextualise the impact. For instance:

• How extensive is the company’s deforestation compared to the industry it is part of? (Learn more about comparisons here.)

• In evaluating the impact on climate, how much CO2 could these forests absorb if they were still there and how much CO2 is released by cutting them down?

Also, ask yourselves the following questions:

1/ The breadth of the impact

• Is the impact local, national, or global?

• How many species or people are concerned?
  
  

2/ The depth of the impact

• Is the biodiversity or people concerned deeply affected, or does the issue just marginally impact them?

• Are the changes brought by the issue profoundly changing society or the planet?
  
  

3/ The persistence of the impact

• How long would the impact described last for? Months? Years? Decades?

• How reversible is the impact described in the impact analysis? Can it be easily stopped/extended?

Find more about evaluating the scale of the impact in Step 5: Assess scale and value.