Introduction

Biodiversity loss is accelerating, driven by global environmental pressures such as climate change and land use. Financial institutions are increasingly acknowledging the need to assess biodiversity impacts in their portfolios to mitigate associated risks. The Biodiversity Footprint for Financial Institutions (BFFI) offers a systematic methodology to calculate and interpret biodiversity impacts from investments and loans. Case studies with Achmea, ING, FMO, and others demonstrated the value of this approach for financial decision-making.

The BFFI Approach

The BFFI methodology employs a four-step framework:

• Scope and system boundary: Identifies economic activities linked to investments and determines the environmental pressures to include, such as land use, water use, and emissions.
• Assess environmental inputs and outputs: Uses databases like EXIOBASE to evaluate sector-specific resource use and emissions, enabling scalable assessments.
• Assess environmental pressures and impacts: Translates resource use and emissions into biodiversity impacts using the ReCiPe model, expressed in Potentially Disappeared Fraction (PDF), where PDF.m².year quantifies biodiversity loss.
• Interpret results and take action: Insights guide investment policies, identify impact hotspots, and inform strategies to mitigate biodiversity risks and optimise positive outcomes.

The cases

• MSCI World Index
  • Assessment of 1,562 companies revealed total biodiversity losses of 15 million km², driven by global warming (41%) and land use (34%).
  • Biodiversity loss averaged 0.56 m² per euro revenue and 0.34 m² per euro invested, with retail trade causing 18.7% of the impact, the highest among sectors.
  • Findings enable benchmarking, prioritisation of high-impact sectors, and integration into ESG strategies.
• Agrovision
  • Agrovision demonstrated a net positive biodiversity impact of 117 hectares due to a reforestation project spanning 1,978 hectares, contributing 1,285 hectares annually to positive impacts over 35 years.
  • Blueberry and asparagus production caused 56% of biodiversity losses, driven by land use and transportation-related emissions.
  • Recommendations included scaling better practices, such as reduced pesticide use, drip irrigation, and low-carbon transport solutions.
• De Rietstap Solar Park
  • Despite an annual biodiversity loss of 7.9 hectares, avoided impacts from replacing fossil fuels outweighed losses by more than a factor of four, avoiding over 30 hectares of biodiversity impact.
  • Renewable energy projects like this could further minimise impacts by using biodiversity-friendly designs, such as native plantings and buffer zones.
• Waternet
  • Waternet’s operations resulted in a biodiversity loss of 3,443 hectares, driven by climate change impacts from methane and nitrous oxide emissions.
  • Scope 3 impacts, such as chemical production for water purification, contributed significantly.
  • Although avoided impacts from untreated sewage discharge were not fully quantified, the study emphasised the potential for water purification to contribute positively.

Conclusions

The BFFI demonstrates the feasibility and value of integrating biodiversity impact assessments into financial decision-making. The case studies highlight that climate change and land use are the primary drivers of biodiversity loss, making carbon footprint reduction a complementary strategy for addressing biodiversity risks. Scope 3 impacts, particularly upstream in sectors like agriculture and downstream through avoided emissions, are critical components of biodiversity footprints. These assessments enable financial institutions to identify sectoral hotspots, such as retail trade, energy-intensive industries, and agricultural production, and to prioritise their efforts accordingly.

Despite limitations in data accuracy and scope, the BFFI provides actionable insights for policy development, investment decisions, and engagement with investees. By starting with available data and progressively improving the approach, financial institutions can effectively minimise biodiversity risks, optimise positive impacts, and align their portfolios with sustainability goals. This method serves as a valuable tool to drive systemic change and enhance resilience within the financial sector.

Recommendations

For financial institutions:

• Policy development: Use biodiversity footprints to guide policies, set investment criteria, and focus engagement efforts.
• Engagement: Initiate discussions with investees to gather specific data and encourage biodiversity-friendly practices.
• Action without perfect data: Start implementing biodiversity assessments to identify priorities and improve over time.

For tool developers:

• Data and accuracy: Improve land-use classifications, integrate location-specific ecological data, and replace generic databases with company-specific information.
• Usability: Develop dashboards tailored to investment officers and ESG specialists to make footprint data actionable.

The BFFI case studies highlighted how biodiversity assessments enable financial institutions to identify risks, focus resources on high-impact areas, and align portfolios with sustainability goals. While methodological and data limitations persist, this approach offers a foundation for driving systemic change in the financial sector.