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Nickel is the mined commodity most exposed
to biodiversity risks, a recent report by Verisk Maplecroft shows.
According to the consultancy firm, the battery metal’s exposure to such risks is mainly due to the fact that some of the largest nickel operations on the planet are located in biodiverse areas such as Indonesia, New Caledonia and the Philippines.
“Our data show Indonesia has the highest
risk of all major producers. The country is the world’s largest producer of
nickel ore and home to one of the world’s biggest copper-gold mines,” the
report reads. “Meanwhile, Brazil — another high-risk nation — is the world’s
second-largest producer of iron ore. Along with Papua New Guinea, these
countries are all rich in globally important biodiversity, but safeguards for
those valuable species and ecosystems are under threat.”
The review also points out that Zambia,
Mexico, the Democratic Republic of Congo and Ghana fall in the middle in terms
of risk because each boasts significant biodiversity that will need to be
protected if mining operations in those countries continue to expand.
“OPERATORS NEED TO WORK OUT A WAY OF
MEASURING BIODIVERSITY RISK ACROSS THEIR PORTFOLIOS AND CALCULATE THEIR
EXPOSURE TO THE THREATS OF NATURAL CAPITAL DEPLETION IN A WAY THAT SATISFIES
INVESTORS”
Verisk Maplecroft
On the other side of the spectrum are — at
least for now — well-established major producers such as Australia, Chile, the
US, China and South Africa, where the risk is far lower due to mining taking
place in areas with lower value biodiversity and greater protections for
nature.
“However, as these markets develop, in part
due to skyrocketing global demand for battery materials like nickel, we can
expect biodiversity risk to increase in tandem,” the report reads.
Looking at the other commodities, Verisk
Maplecroft puts the spotlight on thermal coal and notes that large-scale
production of the fossil fuel in Indonesian Borneo accounts for the bulk of its
extreme risks score.
Risks for copper, on the other hand, are
spread across multiple geographies including Indonesia’s Papua Province,
Panama, Brazil, Botswana and Turkey. Iron ore’s biodiversity risk is primarily
a result of mines in Brazil.
On a positive note, the UK-based analyst
highlights the fact that most of the commodities scrutinized, well over half of
the production is located in low-risk areas for biodiversity.
How to deal with biodiversity risks
In Verisk Maplecroft’s view, given the
growing demand for nickel and other battery metals, operators will need to get
ahead of investor and regulatory demands.
“A first step is to recognize that
biodiversity risk is no longer a local matter, but part of a global trend that
is making waves among a much wider audience. Operators need to work out a way
of measuring biodiversity risk across their portfolios and calculate their
exposure to the threats of natural capital depletion in a way that satisfies
investors,” the dossier reads. “By participating in the Taskforce for
Nature-related Financial Disclosures, known as the TNFD, they can help shape
what the global disclosure benchmark will look like.”
The TNFD is an initiative launched in 2020
by four nonprofit organizations: Global Canopy, UNDP, UNEP FI, and WWF, to work
with investors to develop a framework for measuring the risks, impacts, and
benefits of economic activities related to biodiversity. The project is
financed by governments, the UN and philanthropic foundations and, at present,
hosts 75 organizations from the private and public sectors, including
heavyweight financial institutions such as Citi and Credit Suisse.
Besides joining such a platform, Verisk
Maplecroft suggests that operators need to factor the results of portfolio risk
analysis into investment and strategic decisions, just as they have with
climate-related risks. Doing so is considered a helpful way to mitigate the
investment and regulatory dangers of operating in high biodiversity areas and
potentially identify opportunities to enhance resilience, business models and
social licence to operate.
“Companies are now being asked to measure
and mitigate activities damaging ecosystems, but will soon be required to
dedicate time and resources to show how much corporate operations and
strategies rely on elements like clean water or natural materials used for
building – often defined as natural capital services,” the review reads.