Despite making up just 0.24 per cent of global land mass, Malaysia is one of the most biodiverse countries in the world. It follows, then, that many of its economic activities are directly or indirectly dependent on nature – and that preserving these resources must be a key pillar in its public policy.

To address nature loss and prevent further nature degradation, the Malaysian government has tax deductions in place for business entities engaged in certified reforestation and conservation awareness activities. There is also growing expectation for institutional investors to play a larger role in ensuring that nature-related risks are properly assessed and managed so that investments do not cause detrimental impacts on nature.

To scale up the amount of finance for nature-positive approaches, this guide jointly published by PwC in collaboration with the Asia Investor Group on Climate Change (AIGCC) provides guidance for investors in Asia Pacific on how they can start assessing and managing nature-related risks within their portfolios. It also includes an overview of the economic dependency on nature by sectors and stock exchanges in the region, such as Bursa Malaysia. The Kunming-Montreal Global Biodiversity Framework, which commits nations to halting and reversing nature loss, estimates that there is an existing annual biodiversity finance gap of US$ 700 billion that must be closed by 2030.

The report shows that companies comprising 58 per cent of the market capitalisation of major Asia Pacific stock exchanges are in sectors exposed to significant nature-related risks, and that 53 per cent of Asia Pacific gross value added (GVA) – US$ 18 trillion – are highly or moderately dependent on nature.

Companies listed on Bursa Malaysia reported to have high dependency on nature make up about 28 per cent of total market capitalisation, while those that have moderate nature dependency make up 26 per cent of market capitalisation. It is part of the group of 11 out of 14 Asia Pacific stock exchanges analysed that exhibit a higher to moderate dependency on nature.

Source: PwC

Higher nature-dependent sectors in Asia Pacific are directly reliant on the extraction of natural resources such as from forests and oceans, or the provision of ecosystem services such as healthy soils, clean water, pollination, and a stable climate. These sectors mainly operate in primary industries such as agriculture, food and beverage, fisheries, forestry, as well as construction.

Sectors with a moderate direct dependency on nature account for 33 per cent of the total Asia Pacific GVA (US$ 11 trillion). They account for the bulk of the sectors analysed, and include the energy, manufacturing, and services sectors. Combined, sectors with either a moderate or higher dependence on nature account for approximately 53 per cent of Asia Pacific GVA (US$ 18 trillion).

The report includes a case study on agribusiness group Wilmar International, which manages plantations in Malaysia and Indonesia, looking at how it is conserving nature through its No Deforestation, No Peat, and No Exploitation (NDPE) policy launched in 2013. Through this policy, Wilmar has identified a total of 32,544 hectares of High Conservation Value (HCV) areas and High Carbon Stock (HCS) forests set aside as conservation areas in its oil palm concessions in Indonesia, Malaysia, Ghana, and Nigeria, accounting for 10 per cent of its total landbank.

According to the report, the company manages these areas through biodiversity surveys and through regular patrols, socialisation with local communities, boundary demarcation, and the training of plantation staff and managers to reduce biodiversity threats. The combination of these actions has reduced the incidence of land clearance, mining, and logging in conservation areas in Central Kalimantan.

The report includes a detailed checklist for investors on managing nature-related risks, including guidance on how to initiate appropriate reporting and disclosure practices.

Source: PwC

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