Industry Classifications

In our comprehensive evaluation of industry classification frameworks, we have meticulously reviewed globally recognized systems to effectively map and assess nature-related dependencies, impacts, risks, and opportunities within our natural capital and ecosystem services work. Here's an overview of the frameworks we have considered, highlighting the primary systems we will utilize and providing summaries of additional frameworks for context.

Primary Industry Classification Frameworks

SASB (Sustainability Accounting Standards Board)

• Overview: SASB provides industry-specific standards for reporting sustainability information relevant to financial performance. It identifies sustainability topics that are likely to affect financial condition or operating performance and provides standardized disclosure recommendations.

• Relevance to Natural Capital and ES Work: SASB's focus on sustainability issues, including environmental risks and social governance factors, aligns closely with evaluating nature-related dependencies and impacts. Its industry-specific approach allows for targeted assessment and reporting, making it invaluable for identifying and communicating nature-related financial risks and opportunities.

• Used by TNFD

GICS (Global Industry Classification Standard)

• Overview: Developed jointly by MSCI and Standard & Poor's, GICS is a comprehensive industry classification system that categorizes companies into sectors, industry groups, industries, and sub-industries. It is widely used in the financial sector for portfolio management, research, and market analysis.

• Relevance to Natural Capital and ES Work: GICS's hierarchical structure and global acceptance make it effective for organizing companies according to their primary business activities. This facilitates the analysis of sector-specific nature-related risks and opportunities, essential for informed decision-making in investment and sustainability strategies.

• Used by ENCORE

NACE Rev. 2 (Statistical Classification of Economic Activities in the European Community)

• Overview: NACE Rev. 2 is the European standard for classifying economic activities, offering a system to categorize entities based on their business operations. It is essential for statistical analysis, policy-making, and economic studies within the EU.

• Relevance to Natural Capital and ES Work: Its detailed classification system enables precise identification of industries and sectors within the European context, aiding in the assessment of environmental impacts and dependencies. NACE Rev. 2 is particularly useful for aligning with EU policies and regulations regarding sustainability and environmental stewardship.

• Used by Swiss Re BES Index

Other Considered Frameworks

NAICS (North American Industry Classification System)

• Summary: NAICS is used by the United States, Canada, and Mexico to classify businesses for statistical purposes. It facilitates the collection and analysis of economic data across these countries. While comprehensive, its focus is more on statistical classification than on sustainability factors directly.

ISIC 4 (International Standard Industrial Classification of All Economic Activities, Revision 4)

• Summary: Managed by the United Nations, ISIC is the most internationally comparable standard for economic data analysis, providing a framework for organizing economic activities. Its global scope is useful, but it lacks the specificity in sustainability and environmental factors that SASB or GICS provide.

TRBC (Thomson Reuters Business Classification)

• Summary: TRBC offers a detailed and dynamic global industry classification system, used extensively in financial analysis. It provides granular insights but does not specifically focus on sustainability or environmental considerations.

ICB (Industry Classification Benchmark)

• Summary: Developed by FTSE Russell, ICB categorizes companies and securities into industries and sectors. While it is widely used for stock market analysis, its focus is less directly on environmental and sustainability issues compared to SASB or GICS.

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While all seven frameworks offer valuable insights into industry classification, SASB, GICS, and NACE Rev. 2 are chosen as the primary frameworks for BASIN Natural Capital's work due to their alignment with sustainability, environmental stewardship, and the specific nature of evaluating nature-related dependencies and impacts. The other frameworks, though considered, were found less directly applicable to the specific needs of natural capital and ecosystem services evaluation.