The Natural Capital Finance Alliance introduced a new web-based tool today called Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE). Designed for global banks, investors, and insurance firms, the tool helps financial institutions assess the risks that environmental degradation causes for them.
ENCORE’s database covers 167 economic sectors and 21 “ecosystem services,” meaning the benefits nature provides that enable or facilitate business production, the NCFA says. The alliance developed the tool in partnership with UNEP-WCMC and received financing from the Swiss Secretariat for Economic Affairs and the MAVA Foundation.
The three economic sectors most materially dependent on nature, according to ENCORE data, are agriculture, fisheries and aquaculture, and forest products. Oil and gas as well as mining also have a high dependence on ecosystem services, according to the tool. The three most important ecosystem services for the global economy were water provision, climate regulation and flood protection, according to the NCFA, which is a collaboration between the UN Environment Finance Initiative and Global Canopy.
“A showcase assessment of the FTSE 100 — one of the world’s most high-profile indices — using information in ENCORE found that in 13 of the 18 sectors that make up the index, a total of $1.6 trillion in net market capitalization is associated with production processes that have high or very high material dependence on nature.”
Examples of high economic dependencies include cereal harvesting relying on pollination and metal processing relying on ground water provision, the NCFA says.
Financial institutions supporting ENCORE include Yes Bank, FirstRand, and VicSuper. IFC, UBS, National Australia Bank, Citi, UniCredit, and CDC Biodiversité were also involved in creating the tool.
“ENCORE enabled us to look at our portfolio in a new way, looking at thresholds and exposure,” said Madeleine Ronquest, head of environmental and social risk, climate change at South African financial services provider FirstRand Limited. “It can help us forecast and has opened up potential new opportunities. We are very happy with the outcomes of the testing phase and got far more out of it than expected.”
