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Crowded out – Asian species feel the heat

EOS Insight
26 January 2024 |
Asia is rich in biodiversity but the risk of nature degradation is high due to rapid urbanisation, agricultural expansion and over-fishing. Sonya Likhtman explores the risks facing the region and the implications for engagement with companies in Asia.

Six of the world’s 17 megadiverse countries – those considered the most biodiversity-rich – are located in Asia: China, India, Indonesia, Malaysia, Papua New Guinea and the Philippines. While it is difficult to generalise across this vast continent, it contains a range of spectacular and biodiverse ecosystems, including tropical rainforests, coral reefs, wetlands, temperate forests and mangroves.

There are numerous biodiversity hotspots, which contain many species that are unique to those locations and face a high risk of extinction. Biodiversity and the associated ecosystem services have a high social and economic value for people across Asia, including many Indigenous communities. Nature is integral for food, water, fuel, health, cultural identity and resilience to climate change, with mangroves playing a critical role in flood risk mitigation.  

Yet the overall risk of biodiversity loss across Asia is high. The Living Planet Index shows that average species population sizes across Asia and the Pacific declined by 55% between 1970 and 2018. Research also shows that Asia is the most under-performing continent in terms of protected areas, with just 13.2% under protection in 2020. West and Central Asian countries perform particularly poorly. This raises questions about whether some countries in Asia will effectively conserve and manage at least 30% of land and sea areas of high biodiversity value by 2030, as agreed in the Kunming-Montreal Global Biodiversity Framework (GBF).  

Biodiversity under pressure

The risk of biodiversity loss in Asia is elevated due to a combination of interconnected factors. Asia is the biggest and most populous continent, currently home to just under 60% of the world’s population. Urbanisation across Asia has been rapid and sometimes unplanned, which has increased pressure on land, energy and other resources. Economic development has lifted many people out of poverty, but often at the expense of nature.

Approximately 90% of the world’s rice is grown in Asia, alongside cash crops such as tea, rubber, palm oil, and coconuts. Agricultural expansion for local consumption and to supply international markets has put pressure on biodiverse habitats, especially where intensive agricultural practices and monocropping are dominant.

More recently, the demand for critical minerals to power batteries in electric vehicles has given rise to renewed risks of biodiversity loss. For example, the rapid growth of nickel mining in Indonesia has been linked to deforestation, pollution and displacement of local communities, serving as a reminder that while electric vehicles will play a key role in the energy transition, there is an urgency for investors to engage on associated supply risks.

Meanwhile, marine biodiversity is threatened by over-fishing and destructive fishing practices such as bottom trawling, which are often linked to illegal and unregulated fishing in South-East Asia. Plastic pollution also continues to be a challenge for river and ocean ecosystems, with Asia making up over 60% of the world’s mismanaged plastic waste.

Healthy ecosystems are fundamental to long-term prosperity, so environmental destruction in the short-term may give rise to challenges further down the line. In fact, research has shown that 99 of the world’s 100 cities that are most exposed to environmental and climate-related risks are located in Asia, with 37 in China and 43 in India. The protection and restoration of nature in Asia is integral to ensuring sustainable development over the long term.

Investor engagement on nature-related topics should complement ongoing engagement on governance, climate change and other material issues for companies in Asia.

Implications for engagement

The private sector has an important role to play in addressing biodiversity loss in Asia, alongside governments and other stakeholders. Investor engagement on nature-related topics should complement ongoing engagement on governance, climate change and other material issues for companies in Asia.

We expect companies to address marine and terrestrial biodiversity loss across their value chains in line with the mission to halt and reverse biodiversity loss by 2030, as agreed within the GBF. Companies should assess and disclose their nature-related impacts, dependencies, risks and opportunities in line with the Taskforce on Nature-related Financial Disclosures (TNFD) recommendations. The insights from the TNFD assessment should be used to develop a strategy, with timebound targets, to address their most material nature-related risks and impacts. Companies should focus on strengthening supply chain oversight and the governance of nature-related issues, including ensuring robust understanding at the board-level and the alignment of lobbying positions. 

In Asia, focus areas include deforestation, regenerative agriculture, sustainable proteins, and plastic pollution. For example, we have engaged with Inner Mongolia Yili Industrial Group and China Mengniu Dairy, the Chinese dairy producers, on their approach to biodiversity and disclosure in line with the TNFD recommendations. In Japan, we have engaged with Yakult Honsha and trading house Mitsubishi Corp on supply chain deforestation risks, with the former publishing a commitment on deforestation and conversion-free sourcing in 2023. We will continue to engage on sustainable fishing with Mitsubishi Corp, partnering with FAIRR under the Seafood Traceability Engagement initiative.

We have also started to engage with financial institutions in Asia, including AIA, DBS Group and Sumitomo Mitsui Financial Group on the biodiversity impacts and dependencies of their financing activities. This builds on our experience engaging on palm oil financing with Bank Rakyat and Bank Central Asia in Indonesia. We welcomed the disclosure of Sumitomo Mitsui Financial Group’s inaugural TNFD report in 2023.

We expect companies to prepare for emerging nature-related policy and regulation, both domestically and internationally. For example, the EU’s deforestation due diligence regulation will impact Asian companies that trade palm oil, cattle, wood, coffee, cocoa, rubber and soy on the EU market. Companies must trace commodities back to source and conduct enhanced due diligence to demonstrate no links to deforestation. The legislation will also focus on the approach to human rights and Indigenous peoples’ rights, which often link closely to engagement on biodiversity.

It is equally important for companies outside Asia to consider their Asian supply chains, which may be where their most material nature-related risks and impacts are located. Overall, given the high risk of biodiversity loss and the unique challenges the continent faces, it is critical for companies and investors to step up their focus on biodiversity in Asia.

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