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Financial risks from biodiversity loss overlooked by investors, regular assessments crucial to businesses, JPMorgan unit says
- Investors must reframe the impact of nature-related risks on the financial performance of businesses, says sustainable investment strategist
- Biodiversity loss ranks third among top global risks by severity in the next decade, behind climate action failure and extreme weather, a WEF survey found
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The financial risks from loss of biodiversity are often overlooked by investors, and regular assessments by businesses are crucial for sound decision-making by investors, according to JPMorgan Asset Management.
The investment community needs to reframe the impact of nature-related risks on the financial performance of businesses, said Tomomi Shimada, the company’s lead sustainable investing strategist for Asia-Pacific in an interview.
“Most companies are now already routinely reporting on carbon emissions, [but] maybe not so much on water consumption or land degradation,” said Shimada.
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By 2030, the decline of biodiversity and ecosystems could cost around US$2.7 trillion annually, or 2.3 per cent of global gross domestic product, with poorer countries being hit the hardest with a GDP drop of more than 10 per cent, according to the World Bank’s “The Economic Case for Nature” report in June.
Biodiversity loss ranks third among the top global risks by severity over the next decade, behind climate action failure and extreme weather, according to a survey of nearly 1,000 experts and leaders in the World Economic Forum’s “Global Risks Report 2022” released in January.
While nature-related risks are not as easy to measure as climate change metrics like carbon emissions, it is important that they are regularly identified, assessed and disclosed by businesses, said Shimada.
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