Request Free Trial
May 3, 2023

Proximity to biodiversity sites increases companies’ ESG incidents and conduct risk

Workers on oil rig
RepRisk points out that oil or gas pipelines are generally located close to at least one environmentally sensitive site (Photo: Omar Torres/AFP/Getty Images)

A new study maps the ESG risks presented by oil, gas and mining activities located in close proximity to key biodiversity areas, and compares public companies’ data to that of privately owned businesses.

A clear correlation exists between an extractive project’s proximity to an environmentally sensitive site, and the occurrence of environmental, social and governance risk incidents, a new report by ESG data provider RepRisk has found.

Extractive economic activities, such as mines or oil and gas projects, are estimated to experience 30 per cent higher environmental risk incidents if located within 1km of a key biodiversity area or an other environmentally sensitive site, as opposed to those 30km further away.

Moreover, if an extractive project is within 1km of a UN Educational, Scientific and Cultural Organization world heritage site, it is considered 36 per cent more at risk than similar projects operating, within the same proximity, to other environmental sites.

The RepRisk report also says that public companies are 77 per cent more at risk of experiencing environmental incidents, whereas private entities face a 27 per cent increase for projects within the same 1km range. According to the data provider, the difference in risk profiles reflects the stance that public entities are generally expected to adhere to a higher ethical standard and are therefore more exposed to ESG risks, such as biodiversity loss.

RepRisk has found more than 31,000 unique ESG risk incidents linked to extractive infrastructure projects since 2007. These are ranked from low severity to high severity and can include direct impacts on nature, such as water or land contamination, or indirect impacts, such as environmental protests.  

Geographically, Latin America accounts for more incidents in the mining sector, whereas North America does so for oil and gas projects. The analysis points out this is probably a result of the regions’ operational presence in these sectors and the amount of attention these receive.

The report also highlights that extractive projects can differ widely in scope. For instance, oil or gas pipelines are usually located close to at least one environmentally sensitive site, whereas mining operations tend to be more contained.

Despite a growing recognition for biodiversity issues, the report warns that the risks associated with the location of extractive and environmentally invasive economic activities are still underreported.

You can find a further breakdown of data here.

A service from the Financial Times