Finance for biodiversity: Guide on biodiversity measurement approaches
The report offers financial institutions insights into measuring biodiversity impacts and dependencies through selected approaches, including sector and location screening, and biodiversity footprinting. It emphasises tools like ENCORE and IBAT, with a focus on alignment with global biodiversity goals and effective biodiversity risk assessment in portfolios.
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OVERVIEW
This report highlights the importance for financial institutions (FIs) to assess their biodiversity impacts and dependencies through finance and investment activities, in alignment with the Finance for Biodiversity Pledge. Updated from 2022, this third edition provides enhanced tools and methods to guide FIs in biodiversity measurement.
Types of measurement approaches
Biodiversity measurement methods are categorised into sector screening, location screening, dependencies and impacts evaluation, and risk and opportunity assessment. Initial sectoral screening helps FIs understand nature dependencies in their portfolios, signalling potential risks. Location screening identifies geographic dependencies, though constrained by gaps in high-resolution biodiversity data. Biodiversity footprinting is used for quantitative impact assessment, as shown in TNFD’s framework examples, helping FIs gauge portfolio impacts.
Measurement approaches selected and criteria for review
The report reviews nine tools, including ENCORE and IBAT, assessing their relevance, scientific foundation, and coverage of biodiversity drivers per IPBES 2019. ENCORE enables sectoral and geographic screening, while IBAT focuses on location-based biodiversity dependencies using spatial data for biodiversity-rich regions. Biodiversity footprint tools like BFFI and CBF offer deeper analysis on dependencies and impacts. Each tool’s maturity, cost, and expertise requirements are evaluated to guide FIs in selecting suitable options.
Overview of measurement approaches
Tools are classified by maturity level, with well-established options like ENCORE contrasted against emerging tools. These classifications assist FIs in choosing tools based on organisational focus (e.g., balance sheet, sector level) and asset applicability (e.g., corporate loans, project finance). This assists FIs in selecting the most appropriate tools for their portfolio needs.
Information per measurement approach
ENCORE provides sector-specific natural capital dependency data, enabling FIs to assess risks. IBAT offers risk assessment with geolocated data, using quantitative metrics like the STAR (Species Threat Abatement and Restoration) score to evaluate extinction risks. The report recommends combining tools, such as ENCORE with IBAT and NBM, to achieve comprehensive biodiversity risk assessments.
Case studies
Case studies highlight the practical use of these tools, with ENCORE applied by financial institutions across regions like South Africa and Colombia to map biodiversity risk hot spots. IBAT supports project finance by meeting the Equator Principles and biodiversity standards. Quantitative data from case studies show how integrating biodiversity metrics enhances risk assessments and biodiversity goal alignment.
Biodiversity data types and sources
Acknowledging data gaps, especially around high-resolution ecosystem data, the report highlights emerging data innovations, including predictive modelling and geolocated data that support biodiversity footprinting. IBAT’s data covers critical biodiversity areas, while ENCORE assesses dependencies across 21 ecosystem services and 8 natural capital assets, aiding comprehensive biodiversity impact measurement.
Measuring marine biodiversity
The report identifies gaps in marine biodiversity assessment, suggesting methods to measure portfolio exposure to ocean impacts. Recommendations include prioritising sensitive marine zones and sectoral assessments in marine biodiversity impact evaluations.
Next steps
The report advises FIs to use these tools effectively, balancing costs and expertise needs. Collaboration across institutions is encouraged to further develop biodiversity measurement capabilities. Advancing biodiversity data, particularly for marine ecosystems, and refining biodiversity metrics aligned with the post-2020 Global Biodiversity Framework are recommended to strengthen biodiversity alignment in financial portfolios.
COMPANIES
Actions to take
ESG issues
Finance relevance
RELEVANT LOCATIONS
RELATED TAGS
- conservation
- data-driven
- ecosystem
- engagement
- environmental stewardship
- European Commission
- FfB
- financial institutions
- financial risk
- footprint
- global collaboration
- Global Nature Positive Summit Day 2
- impact assessment
- impact management
- investment approach
- measurement approach
- methodology
- portfolio management
- RIAA_NWG
- risk assessment
- species
- stewardship