Environmental risks and opportunities that are overlooked by investors and companies will impact the financial performance of companies in India, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam.
These are among the findings from two new reports by the World Resources Institute (WRI) and the International Finance Corporation.
The reports - Emerging Risk: Impacts of Key Environmental Trends in Emerging Asia and Undisclosed Risk: Corporate Environmental and Social Reporting in Emerging Asia - are being released at a critical time.
Until recently, these Asian markets have focused largely on environment-related reputational risk. But the report additionally highlights the operational, regulatory, and legal dimensions of environmental risks already flowing through companies’ value chains. For example, recent flooding affected companies in Indonesia significantly. Two major floods translated into real impacts on the population and on the country’s largest companies, resulting in declining stock prices and severe infrastructure degradation.
Euan Marshall, program manager of IFC’s Sustainable Investing unit, said, “The global financial crisis is causing companies and investors to reconsider the question, ‘What is risk?’ The investment community has begun to value companies based on how they respond to climate change risks. However, more needs to be done, and companies and investors need to understand the relevance of environmental risk in the context of aggregate financial risk.”
Dana Krechowicz, lead author of the reports and an associate at WRI, added, “Scarcity of water and climate change, among other risks, have and will increasingly affect the region. Economic impacts will be magnified if companies and investors are not well prepared.”
The two reports set the stage for a series of sector-specific reports to be published later this year by IFC, WRI, and HSBC that will identify material environmental risks and opportunities in the region’s food and beverage, real estate, and power generation sectors.
The series of reports are being completed in partnership with the Japanese government.
Susan Holleran, IFC strategy and knowledge program officer, +1 (202) 458-0203, sholleran@ifc.org
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