Financial institutions measuring biodiversity impacts and dependencies

The report emphasises the increasing need for financial institutions (FIs) to assess biodiversity impacts and dependencies to address nature-related risks. These evaluations stem from exposure to sectors with significant biodiversity impacts and dependencies on ecosystem services. It provides frameworks aligned with the Finance for Biodiversity (FfB) Pledge and Taskforce on Nature-related Financial Disclosures (TNFD), highlighting tools and methodologies to support decision-making and risk management.

Practical recommendations for financial institutions

FIs are encouraged to screen sectors with high biodiversity risks and prioritise those with substantial financial exposure. Metrics like investment volumes and geographic data can help identify critical areas. Recommendations include conducting company-level impact assessments, using footprinting methods such as the PBAF Standards. Biodiversity dependency assessments are less developed but critical for understanding potential risks from disrupted ecosystem services.

For location-specific assessments, FIs should use spatial data to assess risks in sensitive biodiversity zones. Tools like TNFD’s LEAP framework can guide these evaluations. Due to data gaps, innovative approaches and collaborations with biodiversity initiatives are essential.

Measurement approaches selected and assessment criteria

The report evaluates 12 biodiversity measurement tools based on criteria such as scientific robustness, alignment with global biodiversity frameworks, and financial applicability. Tools include ENCORE, IBAT, BRF, and BIA-GBS, each offering varied functionalities such as sectoral risk analysis, geographic data integration, and biodiversity footprint calculations.

For instance, ENCORE enables FIs to assess risks linked to natural capital and biodiversity dependencies across sectors, while IBAT offers insights into species conservation priorities. The tools’ maturity varies, with some like ENCORE and IBAT widely adopted, and others in earlier stages of implementation.

Overview of measurement approaches

The guide categorises tools by maturity and applications, mapping their suitability to balance sheet assessments, portfolio management, and sector analyses. It highlights the integration of spatial and financial data, essential for informed decision-making. Tools like BIA-GBS measure biodiversity impacts via global metrics like Mean Species Abundance (MSA), aiding compliance with biodiversity targets.

Information per measurement approach

Detailed tool descriptions include strengths, limitations, input data requirements, and use cases. ENCORE supports early-stage biodiversity risk analysis, while IBAT integrates global biodiversity datasets to prioritise conservation actions. BRF identifies biodiversity risks at portfolio levels using spatial data, and BIA-GBS calculates biodiversity footprints for over 7,200 entities, aiding regulatory compliance.

Case studies

Case studies demonstrate FIs leveraging these tools to enhance biodiversity assessments. Examples include a portfolio-wide biodiversity footprint analysis and sector-specific risk management strategies. These illustrate the importance of integrating data-driven insights into investment decisions.

Biodiversity data types and sources

The guide underscores the importance of comprehensive biodiversity data, including ecosystem services, species abundance, and spatial data. It notes challenges such as inconsistent data formats and availability. Innovations like remote sensing and collaborations with biodiversity databases can address these gaps.

Measuring marine biodiversity

Marine biodiversity remains underassessed. The report recommends deeper analyses for sectors like fishing and shipping, alongside using geolocated data to mitigate impacts. Emerging tools aim to address these deficiencies, enabling better integration into broader biodiversity assessments.

Next steps

The report advocates for collaboration between FIs and biodiversity tool developers to refine methodologies and address data gaps. It emphasises adopting tools suited to specific business applications, engaging in pilot projects, and aligning with international biodiversity targets to ensure robust impact assessments.

Conclusion

The report serves as a practical guide for FIs to measure and manage biodiversity risks and dependencies. It bridges the gap between financial operations and biodiversity goals, aiding FIs in mitigating risks while aligning with global frameworks. With tools and actionable insights, it supports a more sustainable financial system.