Request Free Trial
August 17, 2023

Nature reporting lag

A study of environmental disclosures finds that while addressing climate change in their strategies, lenders and investors still largely ignore broader nature-related issues.

In a new report, non-profit CDP finds that while nearly all financial companies using its environmental reporting platform say their business strategies are influenced by climate change, less than a third take into account forest and water security factors.

The “Nature in Green Finance” study is based on disclosures made in 2022 by more than 550 banks, insurers and other asset owners, representing more than $8tn in market capitalisation, says the non-profit.

Among the main findings, CDP says that:

  • Despite financial companies acknowledging that nature factors can lead to business opportunities, not just risks (estimating the former at more than $5tn in relation to climate, forest and water issues combined), less than 30 per cent are tapping these opportunities.
  • Banks are ahead of other financial companies in terms of integrating nature-related factors in their operations, with 23 per cent of lenders including forest-related covenants in their products and 21 per cent having introduced the same for water.
  • Only 10 per cent of financial companies measure their portfolio’s impact on forest and in terms of water (though an additional 30 per cent say they plan to do so in the next two years).
  • The average reported financed emissions are 750 times larger than operational emissions; they also vary across regions with Europe showing a ratio of 250, Asia-Pacific one of 270 and North American companies using CDP displaying an 11,000 ratio.
  • Financial companies say that investor engagement is an important lever to drive change.

You can download the report here.

A service from the Financial Times