ESG analytics startup NatureAlpha has teamed with a global non-profit biodiversity project to help financial institutions harness biodiversity data so they can make more sustainable investment decisions.
The UK-based company has incorporated the Integrated Biodiversity Assessment Tool (IBAT) into its own analytics to provide a set of metrics that asset owners and managers can use to identify nature-related risks and opportunities within their portfolios. The service, which provides metrics for 3,500 companies, is the culmination of a year of collaboration between the two organisations, said NatureAlpha founder Vian Sharif, and meets two pressing objectives.
“One was the work that we’ve done on how asset managers actually consume ESG data, and the second thing was how to use the IBAT datasets that were, to some extent, starting to form a framework around what constitutes nature and biodiversity targets,” Sharif told ESG Insight.
“We started to produce a dataset that could be used by asset managers in the context of an ESG data feed.”
Former Investec corporate social responsibility director and current head of sustainability at wealth manager FNZ Group, Sharif was drawn to IBAT through her academic studies at the University of Cambridge whose conservation unit has links with the non-government organisations (NGOs) that comprise the alliance’s members. They are the United Nations Environment Programme’s World Conservation Monitoring Centre, the International Union for Conservation of Nature (IUCN), BirdLife International and Conservation International.
NGO Data
IBAT gathers nature-related information and compiles it into three datasets, each following a different methodology created by conservation and other nature-protection groups. The datasets are The International Union for Conservation of Nature (IUCN) Red List of Threatened Species (Red List), The World Database on Protected Areas and the World Database of Key Biodiversity Areas. Its clients can also access Species Threat Abatement and Restoration (STAR) metric, which quantifies the degree to which species are moving towards extinction.
The data is largely geolocated, enabling investors to map their assets to six-figure grid references and their proximity to biodiversity hotspots. NatureAlpha offers analytics on a number of facets of biodiversity impact for companies, including nature risk and biodiversity footprint.
“Combined, you can probably get a decent view of a number of different aspects of how a company is engaging, impacting and depending on nature and biodiversity,” Sharif said.
Growing Concern
Biodiversity has climbed investors’ and asset managers’ priority lists as climate change begins to have an impact on the natural world. Regulators are also placing greater emphasis on biodiversity amid growing awareness that economic activity not only affects nature but also depends upon it.
The UN’s COP15 summit in Montreal, Canada, late last year raised the profile of the discussion when delegates agreed to new targets within the Global Biodiversity Framework, recognising that there was a critical need to halt the rapid loss of nature.
Sharif said that she had been motivated to form NatureAlpha through her work within the financial sector, in which she realised how little biodiversity data was being used by asset managers and owners. She highlighted the challenge with reference to the European Union’s requirement from June that asset managers must begin assessing the impacts that nature change is having on investee companies within in or adjacent to key biodiversity or protected areas.
“I just didn’t see how you could do that accurately without engaging with IBAT because that’s where that information is,” she said.
She said that the combination of geospatial information produced by IBAT with traditional financial information on a cloud-based infrastructure gives asset managers the tools they need to assess their investments at scale.
“The work that we did with IBAT is so priceless for us because it means that we can help investment professionals, who’ve never really engaged with IBAT from the asset management context, so that they’re not just looking at one site of one company, they’re looking at their portfolio of anywhere between 25 companies and potentially 12,000 companies.”
Broader Data
The project’s development is ongoing. While the IBAT data is rich and sourced globally, it is nonetheless patchy geographically and the technology can only permit the examination of broad plots of the Earth’s surface.
NatureAlpha’s metrics take a view of assets relative to their proximity to at-risk and protected areas; the resolution of the data’s coverage is something Sharif hopes will improve over time.
She said IBAT is held in high regard by market participants, who trust its data, making it a strong partner for further collaboration.
“ESG is not just about what the market says, it’s about what the scientific community, the NGO community, the advocacy, the policy community are behind,” Sharif said.
Subscribe to our newsletter
