At the recent UN COP 10 Convention on Biological Diversity held in Nagoya, Japan the world’s environment ministers agreed to cut the loss of forests and other natural habitats by half, increase the amount of land designated as nature reserves from 13% to 17% by 2020 and raise the amount of marine and coastal areas protected by reserves from 1% to 10%.

All companies affect the ecosystems in which they operate but conversely are dependent on functioning ecosystems to stay in business. The UN-backed Economics of Environment & Biodiversity Initiative has estimated the annual cost of biodiversity loss to be between US$2 – US$4.5 trillion representing around 7.5% of global GDP. However ESG research organisation EIRIS has shown that the level of understanding over the impact of, and dependency on, biodiversity-related activities is being largely disregarded by the business community.

Focusing on FTSE-listed companies, EIRIS’ report COP Out? Biodiversity Loss and the Risk to Investors found that though 58% of them operated in sectors whose business activities have a considerable biodiversity impact, only 6% of these ‘high impact’ companies were assessed by EIRIS as having a good biodiversity policy.

Construction, property development, chemicals & pharmaceuticals, and road distribution & shipping sectors are doing the least to tackle biodiversity. The forestry and paper sector meanwhile showed the best performance. Sectors with high biodiversity impacts associated with their supply chains are also failing to tackle biodiversity, while few companies link biodiversity to other key issues such as climate change, water use and waste and air and water emissions. There are also regional variations with European companies being the best performers and Asian companies the worst.

“Investors should take steps to understand the systemic risks that biodiversity loss represents to their investments and use engagement channels to increase business participation in voluntary stewardship schemes to protect biodiversity,” said Carlota Garcia-Manas, Head of Research at EIRIS.

A key component of the COP10 agreement relates to the access and sharing of genetic resources. Businesses may have to negotiate agreements to maintain access to genetic resources and may be required to pay into an international fund to finance research and projects aimed at protecting biodiversity in developing countries. This is set to have serious ramifications across various company sectors, with the pharmaceuticals sector likely to be severely hit. EIRIS’ research however shows that this sector is amongst those doing the least to tackle biodiversity.

For further information, visit the EIRIS website.