Pharmaceutical companies face biodiversity risk

The world’s leading pharmaceutical companies are exposed to risks from their reliance and impact on biodiversity, says a new study launched today. The study by KPMG and the Natural Value Initiative (NVI), titled Biodiversity and ecosystem services: Risk and opportunity analysis within the pharmaceutical sector, reveals the potential business risks facing the pharmaceutical industry from its reliance and impact on natural resources.


Undertaken on behalf of asset manager Robeco with the view to create greater awareness among the investor community, the study reviews the risk exposure of 10 leading global pharmaceutical companies, based on their impacts and dependencies on biodiversity and ecosystem services (BES). The companies include Astra Zeneca, Bayer, Bristol-Myers Squibb, GlaxoSmithKline, Johnson & Johnson, Novartis, Novo Nordisk, Pfizer, Roche and Sanofi.

Lara Yacob, Senior Engagement Specialist from Robeco notes that "while Biodiversity has been on the agenda for decades, investors are only now starting to take notice of the potential risks of dependency and impact on biodiversity to preserving shareholder value”. "We want our portfolio companies to be aware of the risks throughout their value chain and take appropriate measures to mitigate them. In addition to this capitalizing on
opportunities arising from the management of these risks is key to capturing growth potential for a company and therefore good for shareholder value”.

Annelisa Grigg, co-author from the NVI, explains that the pharmaceutical sector dependencies on BES include sourcing of active ingredients for drugs and water use in manufacturing. "Protecting and maintaining biodiversity is important to the pharmaceutical industry as a significant proportion of the ingredients to activate in medicines, come from our natural environment. "The impacts include water pollution and use of inert ingredients linked with environmental degradation such as palm oil. These can pose regulatory, operational, reputational, market and financing risks,” says Ms Grigg.

Charlotte Linnebank, co-author from KPMG Climate Change and Sustainability, says that while the risk exposure to biodiversity was already on the radar of most of the companies surveyed, the study shows that overall, the Pharmaceutical sector is yet to adequately escalate the issue to include their supply chains. "We found that the companies surveyed that undertake natural product discovery, see it as a source of competitive advantage and innovation. However, alongside these opportunities, mismanagement of BES can pose risks. While some organisations have begun to acknowledge these risks, little work has been done to evaluate risks to their supply chains,” says Ms Linnebank.

Ms Grigg recommends companies expand their environmental risk assessments to consider impacts and dependence on BES. "Such assessments should address the sourcing of inert and active ingredients from nature in drug discovery, development and manufacture as well as the direct operational footprint of manufacturing sites,” concludes Ms Grigg.

The full study you may find here.

For further information or an interview, please contact:

USA:
Rebecca Foges,
Communications Officer
Fauna & Flora International
Tel: +1 917 744 4305
Rebecca.foges@fauna-flora.org

Europe:
Caroline Baldwin
Media Relations Director
KPMG Global Climate Change and Sustainability
Tel: + 31 20 656 2946
cbaldwin@kpmg.com

Robeco:
Janneke Dijkstra
Corporate Communications Robeco
Tel: +31 10 224 1383
j.dijkstra@robeco.nl

Background

Ecosystem services — also called ‘environmental services’ or ‘ecological services’ — are the benefits that people obtain from ecosystems. Examples include freshwater, timber, climate regulation, protection from natural hazards, erosion control and recreation. Biodiversity itself plays a vital role in sustaining our agricultural system – from providing pollinators, to regulating water quality and quantity and ensuring soil quality. A company depends on an ecosystem service if that service functions as an input or if it enables, enhances, or influences environmental conditions required for successful corporate performance. A company impacts an ecosystem service if the company affects the quantity or quality of the service. Biodiversity underpins ecosystem services. Source: C.Hanson et al. (2008) The Corporate Ecosystem Services Review.

About the Natural Value Initiative (NVI)
The NVI is a collaboration between Fauna & Flora International, the United Nations Environment Programme Finance Initiative (UNEP FI), Nyenrode Business University, the Dutch Association of Investors for Sustainable Development (VBDO) and the Brazilian Business School Fundação Getulio Vargas (FGV). The Natural Value Initiative has four broad objectives, to:· Build awareness of corporate dependence on ecosystem services and impact on biodiversity and the links to corporate risk;· Build expertise both in companies and investors on evaluating and managing biodiversity and ecosystem services (BES) risks and opportunities;· Stimulate improved performance within the private sector and encourage greater reward of responsible behaviour;· Mainstream biodiversity and ecosystem services into investment analysis. http://www.fauna-flora.org/initiatives/nvi4.

About KPMG
KPMG is a global network of professional firms providing high quality services in the fields of audit, tax and advisory. We work for a wide range of clients, both national and international organisations. In the complexity of today’s global landscape our clients are demanding more help in solving complex issues, better integration and collaboration across disciplines and faster returns on their investments through value-added partnerships. KPMG’s Climate Change & Sustainability Services is a global team comprised of over 700 professionals whowork in the field of climate change and sustainability - offering advisory, tax and assurance services to both public and private sector organisations. www.kpmg.nl/sustainability-english5.

About Robeco
Robeco, established in Rotterdam in 1929, offers investment products and services to institutional and private investors worldwide. It has approximately EUR 150 billion in assets under management (at 31 December 2010). The product range encompasses equity and fixed-income investments, money-market funds, responsible investing and alternative investments, including private equity, hedge funds and structured products. Robeco advocates responsible investing. Environmental, social and governance factors are integrated into the investment processes, and there is an exclusion policy in place. Robeco makes active use of its voting right and enters into dialogue with the companies in which it invests. Robeco is part of Rabobank Group, one of the few privately owned banks in the world with the highest credit ratings from Moody’s and Standard & Poor’s. Furthermore, within the banking sector, Rabobank is one of the global leaders in terms of corporate social responsibility and sustainability. www.robeco.com
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