Directors' Masterclass Series 2025 Session 2-9: A Deep Dive into Operationalizing Nature Risk Assessments

By Gautier Desme, Head of Nature Research & Methodology, S&P Global Sustainable1

Terence Teoh, Associate Director, Climate & Sustainability Services, S&P Global Sustainable1

Opening and Closing Remarks by Ar. (Dr.) Serina Hijjas, Council Member, Climate Governance Malaysia

The second session of Climate Governance Malaysia’s Directors’ Masterclass Series 2025 was held on 24 June 2025, in partnership with S&P Global Sustainable1.

The session introduced participants to the emerging field of nature risk assessments, framing biodiversity loss and ecosystem degradation as material financial risks for businesses. It also presented a structured methodology for quantifying these risks at the asset level—built on two core pillars: physical value of the asset and the degree of ecosystem degradation—enabling companies to better understand both their environmental impacts and dependencies.

In her opening remarks, Ar. (Dr.) Serina Hijjas emphasised the importance of nature-related risk as a growing area of concern for corporate governance. She noted the session’s alignment with the Global Biodiversity Framework (GBF) and the Taskforce on Nature-related Financial Disclosures (TNFD), and emphasised the need for practical tools to support informed corporate decision-making.

To set the scene, Terence Teoh provided an overview of nature risk as a systemic issue, referencing the World Economic Forum’s Global Risks Report. Nature and biodiversity were positioned alongside climate as interconnected global challenges. Southeast Asia, though occupying just 3–4% of global land area, hosts some of the world’s richest and most diverse ecosystems—making the region particularly important for nature risk assessments. Terence also highlighted ASEAN’s early biodiversity action plans as important regional foundations that preceded and complement global frameworks.

Drawing on sector-level data, Gautier Desme illustrated how nature-related risks are already embedded in corporate operations. Around 75% of transition mineral mining activities take place in areas of high ecological value, including Key Biodiversity Areas (KBAs). As global demand for transition minerals grows to support the clean energy shift, these operations are accelerating in ecologically sensitive zones. Likewise, about 20% of existing data centres—and up to 40% of planned facilities—are located in environmentally significant areas. Driven by the global boom in digitalisation and artificial intelligence, data centre expansion poses new pressures on local ecosystems, particularly in regions like Southeast Asia.

Another point mentioned by Gautier is the two-way relationship between climate change and nature risk. While it is widely acknowledged that climate change worsens nature-related risks—such as intensifying water scarcity—less attention has been paid to how ecosystem degradation can, in turn, heighten climate risks. As an example, forests not only store carbon but also regulate water cycles and filtration. Moreover, certain mitigation and adaptation efforts—like infrastructure built to withstand physical climate hazards—may unintentionally harm ecosystems. Gautier urged a shift in perspective: rather than viewing nature solely as a solution to climate change, we should recognise that a stable climate is just one of the many critical services nature provides.

Building on this, Gautier outlined S&P Global’s asset-level nature risk assessment methodology. The first, to quantify how much physical space a business activity occupies—using geospatial mapping to determine the exact location and boundaries of assets. The second, ecosystem degradation, assesses how much the activity has impacted the condition of the surrounding environment. This is measured through the Ecosystem Integrity Index, which rates ecosystems from 0 (degraded) to 1 (pristine) by analysing structure, composition, and function.

Gautier then introduced the third pillar: ecological significance. This evaluates how important a given ecosystem is, both for biodiversity and the provision of ecosystem services to people. To enable consistent comparisons across regions, S&P Global applies a “hectare-equivalent” model that translates the value of any ecosystem into a standard unit, using globally recognised benchmarks such as the Amazon or Borneo rainforest. This pillar is derived from composited geospatial data, combining multiple layers of environmental indicators to provide a location-specific assessment of ecological importance.

Gautier and Terence showcased a mining-focused case study to illustrate asset-level application. Using geospatial data, six mining sites—including one in Malaysia—were assessed based on their land footprint, overlap with key biodiversity areas, ecosystem condition, and risk to species and people. For instance, one Philippine mine was shown to have heavily degraded the ecosystem and posed high species risk, while the Malaysian gold mine had a lower land use but higher risk in terms of human dependence on ecosystem services.

Ecosystem service dependencies, particularly water provision and erosion control, were assessed using ENCORE data, which showed consistently high water risk across all mining sites. However, by incorporating local context, Gautier revealed that water scarcity was lower in Southeast Asia with more acute risks in China. Similarly, erosion control risk varied significantly, with high exposure in the Philippines and lower risk in Malaysia and China. This shift from a generic risk model to a nuanced, site-specific analysis allowed for a more realistic understanding of risk and resilience.

At the enterprise level, S&P demonstrated how asset-level insights could be aggregated for company benchmarking. A case study Terence presented compared two mining companies and revealed that although one had a smaller absolute land use, its ecosystem footprint was 16% higher due to greater ecological significance. Such findings are essential in identifying reputational and regulatory risks.

The session concluded with reflections from Ar. (Dr.) Serina Hijjas, who noted the practical value of sector-specific examples, particularly in mining, and their potential applicability in sectors like forestry. She highlighted the shift from traditional environmental assessments toward more biodiversity-focused evaluations and emphasized the need for ongoing discussions and analysis as this area continues to grow.

Click here for the photos and slides.