A report published Wednesday has quantified the different reputational risk levels facing firms which undertake extractive projects close to environmentally-sensitive sites, finding that publicly-listed companies operating in proximity to nature are 77% more likely to see damage to their business than those that are not.
ESG data science firm RepRisk analysed the correlation between proximity of extractive projects to environmentally-sensitive sites, and the number of environmental risk incidents reported.
The report found that extractive infrastructure projects within 1 km of an environmentally sensitive site experienced 30% more environmental risk incidents than those more than 30 km away, with risk defined largely as something which negatively impacts the business in question either legally or by reputational damage.
In addition, ownership or operation of a project within 1 km of an environmentally-sensitive site was found to pose a significant risk to a company, for both private and public entities.
The findings suggested however, a much higher 77% increase in risk incidents for public companies, while this stood at a 27% increase for private companies.
Certain types of environmentally-sensitive sites were also associated with higher risk.
Projects within 1 km of UNESCO World Heritage Sites and Alliance for Zero Extinction sites experienced 36% and 35% more environmental risk incidents respectively, compared to other projects.
As a result, RepRisk called for a shift to impact-based metrics that go beyond simply what companies communicate about themselves.
“Negative impacts on the environment and biodiversity – and the subsequent harm it causes to businesses themselves – are avoidable,” commented Philipp Aeby, CEO of the firm.
“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.”
The divide between private and public firms is also seen in climate and carbon spheres.
There are vast differences in disclosure levels, as well as overall environmental impact, between publicly listed and privately listed firms, reports have demonstrated.
The trend of “carbon arbitrage” whereby privately-listed firms, which are subject to much lower levels of environmental scrutiny, buy up assets from public companies, is seen to be on the rise.
By Roy Manuell – roy@carbon-pulse.com
