Investment return
As the link between BES and share value is strengthening, investors are taking action to protect investment value. Investment return can be impacted by: operational risk; liabilities and compliance issues; ability to access finance; and ability to secure and maintain licence to operate.
- • Increasingly restricted access to land: Restriction of access of oil and gas companies to reserves they own or lease in ecologically important and protected areas could amount to a drop of 5% in shareholder value1.
- • Operational risks: According to research by Goldman Sachs, non-technical risks including ecosystem sensitivity can account for around 75% of cost and schedule failures on major oil and gas projects2.
- • Access to finance (credit and loans): Currently 72 financial institutions have adopted the Equator Principles, covering over 70% of international project finance debt in emerging markets3. Companies wishing to secure finance from these banks must have safeguards in place that ensure impacts on biodiversity and ecosystem services are avoided
- • Vulnerability of supply: As the integrity of ecosystems decline, the availability of raw materials such as water, timber and food products become costlier and less easy to secure
Companies that understand and respond to these issues can gain first mover advantage.
CASE STUDIESSecurity of supply and investment return
- Pollination and agriculture in the USA
- Strawberry growing, water use and protected areas in Spain
- Shrimp farming in Asia
- Payments for watershed services in Colombia (SABMiller)
- Securing continued access to water and timber (BAT)
Reputational risk and investment return
1 World Resources Institute, 2002. Changing Oil. Emerging Environmental Risks & Shareholder Value in the Oil and Gas Industry
2 UNEP FI (2010) CEO Briefing. Demystifying Materiality. Hardwiring biodiversity and ecosystem services into finance
3 http://www.equator-principles.com/index.php/about-ep/about
