ESG Thema #15 - Measuring the Biodiversity Footprints of Investments: An Assessment of the Metrics

The urgency and scale of biodiversity loss are exposing a high number of companies across sectors to significant financial risks. In this context, it has become increasingly necessary for investors to reliably assess the impact and dependence of companies on biodiversity. 

ESG Thema #15 - Measuring the Biodiversity Footprints of Investments- An Assessment of the Metrics

Key takeaways 

  • As of today, there are significant hurdles to effectively account for biodiversity, such as challenges around data measurement and a lack of clear standards for reporting. However, work on the topic is moving fast: guidance is provided by the Taskforce on Nature-related Financial Disclosures (TNFD) and the Global Reporting Initiative (GRI) has published its Biodiversity standard to support organizations in disclosing their biodiversity-related impacts. 
  • To measure corporate biodiversity impacts, a biodiversity metric has emerged: the Mean Species Abundance (MSA). It expresses the mean abundance of original species in a habitat compared to their abundance in an undisturbed habitat. The MSA is used by an increasingly high number of companies and financial institutions to measure biodiversity footprints.
  • In this paper, we argue there is a strong case for integrating the MSA into investment frameworks, from risk management purposes, to impact assessment and compliance with emerging regulations. 
  • We then analyze the distributions of MSA scores in both equity and fixed income indices to understand discrepancies in corporate biodiversity footprints across regions and sectors. The aim is to help investors have a more precise view of the different biodiversity footprints of the various components of their portfolio. 
  • Finally, we assess the strengths and limitations of the MSA metric, and suggest to combine it with other indicators to ensure a more comprehensive integration of biodiversity measurements into investment frameworks.

You can now read the full whitepaper at the link below