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Sustainability

“Where climate meets biodiversity” in Madrid

“85% of the companies in the S&P Global 1,200 significantly depend on nature across their direct operations”[1]. This was one of many eye-opening messages from NatWest’s customer event in Madrid under the heading “Where Climate meets Biodiversity”. 

Key take-aways from the day included:

  • Nature provides us with raw materials and ecosystem services that are worth US$125 trillion per year[2], with 55% of the world’s total GDP, $58 trillion, moderately or highly dependent on nature. This financial materiality needs to be considered to ensure future profitability, and survival.
  •  Ultimately, all organisations have an indirect exposure to environmental risk, if they are aware or not. In Europe alone, extreme weather events caused over €145 billion in economic losses from 2012 to 2022.
  • Up to US$577 billion in annual global crop production is at risk from pollinator loss. A collapse in ecoservices, such as wild pollination, provision of food from marine fisheries, and timber from native forests, could result in a global GDP decline of US$2.7 trillion by 2030.
  • The understanding of natural capital has improved in the corporate world. Yet, despite this recognition and progress, the associated business risks remain underexplored. Companies need to gain an overview of the specific natural capital risks that confront them, in order to invest and further mitigate them.
  • To underpin the connectivity between climate and natural capital, it is important to note that 87% of global electricity generated from thermal, nuclear, and hydroelectric systems is directly reliant on water availability. Meanwhile, 33% of the thermal power plants that rely on freshwater availability for cooling are in high water stress areas[3].
  • All organisations – corporates, financial institutions, and the public sector – ought to focus on three workstreams to consider the current and growing risks needed for effective decision-making:

 

  1. ESG integration,
  2. Climate or transition assessments, and
  3. The broader scope of environmental risk, including biodiversity and natural capital.

 

  • Regardless of individual methodologies, every organisation needs a ‘re-wiring’ to successfully mitigate risks as well as take advantage of opportunities – ultimately resulting in a sustainable future. 
  • Each organisation’s speed of transition will depend on the underlying materiality of its business, the sectors it is operating in, and the level of control the organisation has over its stakeholders, in particular supply chain partners.
  • Although reporting is challenging, it is a powerful tool to ensure that these risks and opportunities are managed proactively to avoid “environmental blind spots” – which are particularly evident in supply chains. 

NatWest playing a proactive role in the decarbonisation of our economy

If you want to find out more about the support available to help with your sustainability journey, then please do get in touch through your usual bank contact.

Sources

1: Source: S&P Global
2: Source: Unilver
3: Source: UN Climate Change

This article has been prepared for information purposes only, does not constitute an analysis of all potentially material issues and is subject to change at any time without prior notice. NatWest Markets does not undertake to update you of such changes. It is indicative only and is not binding. Other than as indicated, this article has been prepared on the basis of publicly available information believed to be reliable but no representation, warranty, undertaking or assurance of any kind, express or implied, is made as to the adequacy, accuracy, completeness or reasonableness of the information contained in this article, nor does NatWest Markets accept any obligation to any recipient to update or correct any information contained herein. Views expressed herein are not intended to be and should not be viewed as advice or as a personal recommendation. The views expressed herein may not be objective or independent of the interests of the authors or other NatWest Markets trading desks, who may be active participants in the markets, investments or strategies referred to in this article. NatWest Markets will not act and has not acted as your legal, tax, regulatory, accounting or investment adviser; nor does NatWest Markets owe any fiduciary duties to you in connection with this, and/or any related transaction and no reliance may be placed on NatWest Markets for investment advice or recommendations of any sort. You should make your own independent evaluation of the relevance and adequacy of the information contained in this article and any issues that are of concern to you.

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