May 3, 2023, Zurich, Switzerland
Link found between proximity and biodiversity risk – with public companies 77% more exposed
# Extractive projects within 1 km of environmentally sensitive sites experience 30% more environmental risk incidents than those more than 30 km away.
- Data from ESG data science firm RepRisk confirms concerning correlation between proximity of extractive projects to environmentally sensitive sites, and the number of environmental risk incidents reported.
- Operating within 1 km of environmentally sensitive sites increases the number of environmental risk incidents by 77% for public companies and 27% for private companies.
New research from RepRisk, a leading ESG data science firm combining machine learning and human intelligence to identify ESG risks, shows a clear correlation between the proximity of extractive projects to environmentally sensitive sites, and a steep increase in potential environmental risk by owner and operator companies. Extractive projects within 1 km of an environmentally sensitive site experience 30% more risk incidents than those 30 km away.
Public companies operating extractive projects within 1 km of an environmentally sensitive site show a 77% increase in environmental risk incidents. Private companies operating within the same vicinity only experienced a 27% increase. This is largely because public companies are not only more exposed to ESG risk overall, but also tend to be held to a higher standard when it comes to biodiversity risk.
“To promote responsible business conduct and sound decision-making, we must shift to impact-based metrics that go beyond what companies communicate about themselves,” commented Philipp Aeby, CEO and Co-Founder of RepRisk.
“Negative impacts on the environment and biodiversity – and the subsequent harm it causes to businesses themselves – are avoidable. Biodiversity risk is a financial risk: to mitigate potential legal, financial, reputational, or compliance fallout caused by environmental harm, stakeholders need to be equipped with the right data and warning signals, such as proximity data and business conduct data. Overall, it is critically important that investors and allocators treat ESG risk as a primary consideration when deciding whether to invest in or fund infrastructure projects.”
RepRisk captures an environmental risk incident when a company is criticized for negative environmental impact. The breakdown of environmental incidents across sectors and regions was also pertinent to RepRisk’s research – as shown in the table below.
For example, 1,373 risk incidents were reported across 379 oil and gas projects taking place in Europe, and 843 risk incidents were reported for the 350 mining projects occurring in Africa. Significantly, 31% of the oil and gas projects in Africa included in this research have at least one owner located in Europe. Additionally, certain types of environmentally sensitive sites are exposed to higher risk levels – projects within 1 km of UNESCO World Heritage Sites and Alliance for Zero Extinction sites experience 36% and 35% more environmental risk incidents than projects within 1 km of other site types, respectively.
Table 1. Number of projects and environmental risk incidents by region
Data from RepRisk revealed the East African Crude Oil Pipeline is within 1 km of 33 environmentally sensitive sites – using geospatial proximity data would have given investors and project planners insights into the potential proximity risks ahead of time. This research indicates that despite a growing global focus on biodiversity, there is still a lack of awareness about potential material risks associated with the location of extractive projects.
“This analysis is the first of its kind that looks at controversy data in and around protected areas and Key Biodiversity Areas. It shows that location really is critical for investors to understand when it comes to understanding biodiversity related risk, and that there is an increased reputational risk associated with operating extractive infrastructure projects close to globally important sites for nature", commented Edward Ellis, Business Manager at IBAT Alliance.
These findings were uncovered through RepRisk Geospatial, which currently provides insights for 65,000+ extractive projects, their owner and operator companies, and their proximity to 300,000+ environmentally sensitive sites. The biodiversity risk data relates to extractive projects in the mining and oil and gas industries and can be readily applied to financial decision-making and regulatory compliance.
Notes to Editors
To generate its dataset, RepRisk intentionally excludes company self-disclosures to provide clear and transparent insights on a company’s ESG and business conduct risks. RepRisk takes an outside-in approach by looking at a broad range of public media and stakeholder sources in 23 languages to identify ESG risks – with daily data updates across 102 ESG risk factors and mapped to standards such as UNGC, SASB, and SDGs.
About RepRisk
Founded in 1998 and headquartered in Switzerland, RepRisk is a global technology company that provides transparency on business conduct risks like deforestation, human rights abuses, and corruption. RepRisk enables efficient decision-making for clients and supports alpha generation and value preservation for their organization, investments, and business interests. RepRisk is trusted by 80+ of the world’s leading banks, 17 of the 25 largest investment managers, corporates, and the world’s largest sovereign wealth funds for their due diligence processes. RepRisk uses human curation and cutting-edge artificial intelligence to generate the world’s most comprehensive business conduct and biodiversity risk datasets on public and private companies, real assets, and countries.
Visit us at www.reprisk.com.
