New joint initiative to develop pioneering tool for measuring investment impact on biodiversity

AXA Investment Managers, BNP Paribas AM, Sycomore AM and Mirova (an affiliate of Natixis Investment Managers), launch joint initiative to develop pioneering tool for measuring investment impact on biodiversity; strongly believe that preserving the planet’s biodiversity is an urgent priority. Together, they have launched a call for expressions of interest (CEI) for a partner to develop and implement an innovative tool to measure the impact of investments on biodiversity. The goal of the CEI is to find a player capable of rating companies according to their impact on biodiversity on a large scale.

There is growing interest in quantitative indicators among regulators, investors, and their clients because these indicators can be used to measure the impact of investments, particularly environmental impact, in order to obtain concrete portfolio sustainability assessments.

Since COP 21 in 2015, the number of tools available has multiplied. Today, there are tools for measuring carbon impact, for measuring the extent portfolios are in line with the 2°C trajectory and many others, but these assessments remain largely focused on climate change. However, it is equally important that we preserve species and ecosystems. There is scientific consensus in this regard: one million species are facing extinction. Biodiversity plays a vital role, and its collapse would jeopardise the future of humanity.

This coalition of investors is looking to work with an ESG data provider that is capable of developing and implementing a methodology for measuring the impact of a company’s activity on biodiversity. The long-term goal is to create a dedicated database. In order to provide investors with the most significant and useful assessments possible, the methodology must be consistent with the following principles:

• Impact measurement: the methodology must provide a “physical” indicator (e.g.: kilometer abundance index, potential for extinction of species, etc.)
• “Lifecycle” approach: the methodology must factor in the entire supply chain from product use to end-of-life.
• Sector estimates: sector assessment grids should make it possible to make estimates tailored to the specificities of each sector.
• Ease of use, for a variety of purposes: communicating about impact on biodiversity, providing more extensive reporting, etc.
• Flexibility and transparency: the methodology must be compatible with the public taxonomies and internal environmental assessment systems already in use, regardless of whether they’re proprietary or open source.
• Aggregation and communication: the data provided must simplify portfolio performance assessment in relation to an index.
• Application scope: the approach must be applicable to companies active in the main market indices (listed equities and fixed income funds). Ideally the method should be compatible with other asset classes (listed and unlisted equities, fixed income funds, infrastructure, real estate, etc.).
• Financial materiality: companies’ levels of exposure to the challenges presented by biodiversity must be assessed in addition to physical impact.