Beyond polar bears: How nature-related financing can help companies be more resilient

It's about integrating nature into economic value chains, and not just viewing it from a restoration or conservation perspective, says UOB chief sustainability officer Eric Lim

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A cracked, parched earth. Bare trees and withered crops. Emaciated livestock. That is often the image one has when a drought occurs. An image that is often far flung from the day-to-day realities of many people.

However, glovemakers in Malaysia felt its effects very keenly in 2014, after a water rationing exercise—a response by Selangor state to a prolonged drought—raised their costs and disrupted production.

Top Glove's chief executive officer at the time, Lim Wee Chai, said then that the company may be forced to halt production, should the situation continue.

The company subsequently invested RM15 million (S$4.6 million) to set up water treatment plants that could provide reverse osmosis to operating facilities, to reduce its reliance on municipal water.

It also implemented other measures to enhance its water resilience, such as harvesting rainwater as a sustainable water source, as well as introducing water recycling in its factories.

Glovemakers' dependency on water is an example of why there needs to be a rethink on nature's relationship with how people live and work, and how companies conduct their businesses, said UOB chief sustainability officer Eric Lim.

"Some people may think of nature as polar bears and trees, and less of water, air, land, atmosphere—drinkable water, arable land, breathable air," he said.

"These are the natural capital that is all around us, and essential inputs to our daily lives and business models."

RETHINKING THE INTERACTION BETWEEN BUSINESS MODELS AND NATURE

It goes back to how people and companies use water, air and land—forms of natural capital that have sustained humanity and socio-economic growth at almost zero or low cost for millennia, yet are often overlooked.

To this end, UOB published its nature strategy in March this year, as it believes it should help clients start thinking about how their business models interact with these natural ecosystem services.