ENCORE releases new Southeast Asia Nature Risk toolkit for financial institutions
Financial institutions can use the toolkit to find tools, data and guidance for assessing nature-related financial risk in the region.
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Lenders, investors and insurers across Southeast Asia are building capacity to address their exposure to nature-related financial risk. However, many face challenges finding the region-specific tools and datasets needed to assess these risks effectively.
ENCORE is, of course, a useful starting point – it’s now widely used by financial institutions for risk assessments, including those following the TNFD’s LEAP (Locate, Evaluate, Assess and Prepare) approach. However, those looking to go further with more granular assessments need region-specific tools and data to locate operations and suppliers, assess the capacity of local ecosystems to provide services and withstand pressures and identify physical and transition risks. These region-specific approaches can support institutions to better understand risk materiality at the company level and take action to manage these risks through investment decisions, portfolio management and client engagement.
The Southeast Asia Nature Risk Toolkit has been created to help financial institutions take this next step – connecting users with more than 120 region-specific tools and datasets they can use to assess, monitor and manage risk, plus further resources on scenario analysis and country-level developments on nature risk. The toolkit focuses on four countries each with their own unique economic and nature risk profile – Indonesia, Malaysia, Thailand and Viet Nam.
The toolkit is a joint initiative by Global Canopy, the Asia Investor Group on Climate Change (AIGCC), the UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC), and UN Environment Programme Finance Initiative (UNEP FI), with support from Proforest and funding from Swiss State Secretariat for Economic Affairs (SECO) and AIGCC.
Assessing nature risk in Southeast Asia
Southeast Asia is home to diverse and economically significant ecosystems, including 15% of the world’s tropical forests and 56% of its tropical peatlands, as well as major river systems and over 100,000 km² of coral reefs. These ecosystems provide essential goods and services that drive economic productivity across the region and underpin key sectors such as agriculture, fisheries, tourism and infrastructure.
Research by the Asian Development Bank found that 75% of Asia’s economic output comes from sectors with medium to very high dependence on ecosystem services, compared with 65% globally.
However, degradation and loss of these natural assets is creating emerging risks for Southeast Asian economies and the institutions that finance them. The Southeast Nature Risk Toolkit has been created to support financial institutions as they build internal capacity to understand and manage these risks.
The materials can be used either as standalone references or as a connected sequence. The structure follows a logical progression from carrying out an initial assessment using ENCORE, to understanding available tools to applying data, engaging with market conditions and exploring scenario analysis.
What the toolkit includes
- ENCORE plug-and-play workbook – A new spreadsheet-based tool that enables financial institutions to quickly screen for material dependencies and pressures on nature and prioritize next steps, with country-specific data for Indonesia, Malaysia, Thailand, and Viet Nam.
- Nature assessment tools and datasets catalogues – Curated listings of more than 50 tools and over 70 datasets. These can be filtered by geography, sector and use case and support a wide range of approaches to assessing nature risk.
- Country-level overview of nature finance landscape – An overview of regulatory, supervisory and private sector initiatives to integrate nature risk in Indonesia, Malaysia, Thailand and Viet Nam.
- Nature-related physical risk library – A library of nature-related physical risks helps users translate environmental change into financial impacts and build nature-related risk pathways.
- Case studies and guidance: Practical examples and step-by-step support to help users apply the toolkit and build internal capacity.
The toolkit supports, but is not limited to, assessments following the TNFD’s LEAP approach. Assessing and managing nature-related risk using the toolkit can help financial institutions strengthen their resilience against nature loss, navigate a rapidly changing regulatory and policy landscape, access new markets and collaborate with partners on sustainable finance initiatives.
The toolkit and related resources are all available to download on the resources page of the ENCORE website.