Allianz report: Failure to manage natural resources brings increasing interruption and liability risks for businesses

In a new report, AGCS analyzes data from research provider MSCI ESG Research, covering more than 2,500 companies, in order to assess the natural capital risk exposure in 12 industries. The oil and gas, mining, food and beverage and transportation sectors rank highest in terms of risk exposure, based on five factors - biodiversity, greenhouse gas (GHG) and non-GHG emissions, water and waste. All are classified as being in the 'danger zone', meaning the natural capital risks businesses face are, on average, greater than the mitigation options currently employed.

Companies in the oil and gas and mining sectors have a high level of natural capital risk exposure due to the nature of their business. For example, in the mining sector, over 90 percent of global iron ore production is derived from areas that have a high risk of water stress and biodiversity impact. The transportation sector also falls into the 'danger zone' because of its biodiversity impact and GHG and non-GHG emissions. Transportation-related carbon emissions have increased by 250 percent since 1970 and now account for 23 percent of all global emissions, so there is room for further steps to be taken by the sector, such as emissions control or mitigation measures to reduce the impact on flora and fauna, the report says.

The food and beverage sector also ranks in the 'danger zone' because of its high dependency upon natural capital in its supply chains. Despite the significant risk of supply disruption as a result of water stress, only 20 percent of MSCI All Country World Index food products companies have begun to address this in their agricultural supply chains.

Further, flora and fauna are often damaged by excessive use of pesticides, reducing fertility and increasing vulnerability to weather events, causing crop failure for suppliers of food companies.