Early this year Bloomberg announced it would incorporate the London Natural History Museum’s Biodiversity Intactness Index (BII) into its own data products.
The BII is a gauge of biodiversity change across the world, which the world-famous museum said offers a health check on nature.
Now Bloomberg has launched its first product built specifically to utilise the BII. Unveiled in time for the Nature COP16 gathering in Colombia, the tool will enable clients to assess nature-related impacts and dependencies associated with as many as 45,000 companies.
A-Team Group’s Data Management Insight caught up with Bloomberg nature solutions product manager Christian O’Dwyer to find out more about the new data tool.
Data Management Insight: How can clients use and access the service?
Chris O’Dwyer: Bloomberg is the first global financial data and technology vendor to provide analysis of biodiversity-related risks relying on a combination of the latest version of the Natural History Museum’s Biodiversity Intactness Index (BII) with physical assets data. The data is available on the Bloomberg Terminal and via Data License, to help users integrate assessments of all aspects of a company’s dependency and impact on nature directly into their investment decision-making processes.
DMI: What is the appetite among clients for biodiversity tools?
CO: Financial firms increasingly seek to understand how companies are exposed to nature risk, thanks to the emergence of best practice disclosure frameworks such as Taskforce for Nature-related Financial Disclosures (TNFD) and relevant regulatory frameworks such as EU’s Deforestation Regulation and Corporate Sustainability Reporting Directive (CSRD). To help our clients with this task, we ran a pilot project through 2024 to determine what type of data and analytics firms need and how they want it delivered. This helped us design the offering we’re launching today.
DMI: Are you able to quantify how much capital is exposed to nature risks?
CO: According to research provider BloombergNEF, a handful of regulators have published early research on how much financial institutions will be impacted if they continue to overlook nature risks. The European Central Bank estimates that nearly 75 percent of all bank loans in the euro area are to companies that are highly dependent on at least one ecosystem service.
In a 2020 study, De Nederlandsche Bank estimated that Dutch financial institutions alone have €510 billion ($571 billion) exposed to biodiversity risks, which represented 36% of the portfolio analysed at the time. The Banque de France estimated in 2021 that 42% of securities portfolios held by French financial institutions were made of securities raised by companies dependent on at least one ecosystem service.
It’s also worth noting that the most recent analysis conducted by the UK Green Finance Institute in April 2024 estimated that nature degradation could cause a 12 per cent loss to UK GDP.
DMI: How will clients be able to map this data across entity data?
CO: Bloomberg Terminal screens natively build in Bloomberg’s corporate structure data. This means that when looking at a bond, for example, the nature solution screen will populate with the nature-related data for the relevant issuer. In addition, Bloomberg has built in some additional capital structure roll-up logic into geospatial datasets. This means that a company’s exposure to areas of high biodiversity intactness or high-water stress will include its subsidiaries.
Biodiversity data is ever present in disclosure regimes such as TNFD and the European Corporate Sustainability Reporting Directive. To support the reporting needs of our clients, Bloomberg provides an Enterprise Data License product accompanied by mapping tools to help them understand which content sets correspond with common biodiversity-related reporting frameworks.
We are also seeing a growth in biodiversity and nature-related financial products. The Data License solution allows the integration of nature and biodiversity data into internal systems and workflows, where it can be easily merged with other security master or legal entity data, such as company financials, to optimise portfolio construction and delivery of client reporting.
DMI: Is there a geospatial element to the outputs?
CO: The new offering combines Bloomberg’s trusted datasets on company revenue segmentation, supply chain and asset locations with nature and biodiversity-related geospatial data.
The biodiversity indicators are underpinned by the Natural History Museum’s Biodiversity Intactness Index (BII), a science-based metric that maps the world’s landmass and provides an estimated percentage of the natural biodiversity still present in any given area, using data on over 60,000 unique species in combination with measures of human pressures on nature and statistical modelling approaches.
For water risk, the data is underpinned by the World Resources Institute’s Aqueduct for water stress, which measures the ratio of total water demand to available renewable surface and groundwater supplies.
DMI: How does Bloomberg see the future appetite for nature risk metrics such as these?
CO: We expect financial firms to increasingly seek to understand how companies are exposed to nature-related risk, based on three drivers:
First, the degradation of ecosystems and loss of biodiversity, which continues at a rapid pace. The latest research from the Natural History Museum shows that the BII has dropped to an alarming 63 per cent globally.
Second, the economic cost of non-action, which the World Bank estimates could result in a decline in global GDP of $2.7 trillion annually by 2030.
Third, greater disclosures of company data under TNFD and CSRD, which will lead to further transparency and evidence of how financially material nature and biodiversity is to companies.
DMI: What plans are in the pipeline to develop the nature analytics?
CO: We will continue to refine the offering to cater for the needs of our clients. For example, we’re planning to complement the sector-driven impact risk with sector-driven nature dependency risk, and we’ll continue to integrate the historical time series of the BII to uncover trends and for example show if companies are operating in areas where ecosystem health is declining.
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