Stockholm (NordSIP) – Institutional investors’ ability to keep pace with growing nature-based disclosure requirements received a boost on 1 July 2024 with the launch of a major upgrade to the United Nations supported ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) tool. Launched in 2018, the freely accessible ENCORE tool was jointly conceived and constructed by UK-based non-profit Global Canopy, the UNEP Finance Initiative, and the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC). Its core aim is to help companies and their investors understand how their activities rely on nature, with a view to evaluating and addressing the relevant risks and opportunities.
The Kunming-Montréal Global Biodiversity Framework agreed at the 15th meeting of the Conference of Parties to the UN Convention on Biological Diversity (COP15) in December 2022 has pushed nature up the sustainable investment agenda, and ENCORE is seen as the first port of call for investors seeking alignment with the recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD).
From magnifying glass to microscope
The main benefit of this latest update is a much higher degree of granularity. The previous 92 ‘production processes’ have been superseded by 271 ‘economic activities’ as defined by the International Standard Industrial Classification for All Economic Activities (ISIC). This also provides better alignment with the UN’s System of Environmental Economic Accounting (SEEA) Ecosystem Accounting, which incorporates nature-related services that had not previously been captured. These include non-monetary benefits such as recreation, aesthetic appeal, education, and other positive contributions to human physical and mental wellbeing.
The ENCORE team has also improved the methodology that underpins the ratings, with more precise, quantitative materiality scoring that allows for greater comparability across industries and sectors. Along with the greater granularity, an investor looking to assess its investee companies’ exposure to nature-related risks withing the agricultural sector is now able to drill down to the production of specific crops such as rice or sugar cane rather than the previously used far broader categories such as large-scale irrigated arable crops or large-scale rainfed arable crops.
Commenting on the launch of the upgraded tool, Head of UNEP-FI Eric Usher said: “ENCORE provides an unparalleled resource for financial institutions to evaluate their environmental exposure, offering critical insights into the nature-related impacts and dependencies within their portfolios. This new update follows the demand of our membership and makes ENCORE even more useful as a screening tool, empowering financial institutions to integrate nature considerations into their strategic decision-making, fostering resilience and sustainability.”
The improvements to the ENCORE tool will be incorporated within a forthcoming update to the online tool. However, users can already access the new knowledge base via downloadable spreadsheets for offline analysis, along with resources aimed at helping with the transition from the previous version of ENCORE.
