Within this context, investors are increasingly focusing on this topic, driven by increased awareness of the implications, growing client interest, regulatory change, and potential new markets.
This week sees the start of COP15 (the UN Conference on Biological Diversity) in Canada. The hope is that stakeholders will come together and agree on goals to inform global policy action to halt nature loss and drive restoration activities.
In response to the escalating risk, the Taskforce for Nature-related Financial Disclosure (TNFD) was established to develop and deliver a risk management and disclosure framework.
abrdn hopes TNFD and COP15 will support a shift in global financial flows away from nature-negative outcomes and towards nature-positive outcomes.
The challenge, however, is that measurement of nature impact is not well understood.
How can nature-positive outcomes be measured?
abrdn has been exploring the merits of different nature-related metrics. Given the complex and emerging data landscape, abrdn formed a collaboration, with EY and the Natural History Museum (NHM) – a world-leading science research centre and the most-visited indoor attraction in the UK last year.
The aim was simple: to carry out a TNFD pilot study – bringing together EY’s insights on the data and reporting required to align to the TNFD Beta Framework, while drawing on NHM’s expertise to measure the potential biodiversity gain for one or more of abrdn’s real asset investments.
Biodiversity is a key nature metric and one of the control variables to how we measure the health of our planet.
Biodiversity is a key nature metric and one of the control variables to how we measure the health of our planet.
Biodiversity Intactness Index
Using NHM’s Biodiversity Intactness Index (BII) it’s possible to measure an asset’s biodiversity baseline and also model how different land management practices will alter that state.
The BII uses the most comprehensive evidence base of its kind, comprising nearly five million data points from over 48,000 sites in over 100 countries.
This is a taxonomically-representative set of 58,000 plant, animal and fungal species which works alongside NHM’s PREDICTS (Projecting Responses of Ecological Diversity In Changing Terrestrial Systems) model that enables analysis of different scenarios.
What does ‘good’ look like?
A BII score of 100% is a pristine location where there are no signs of human interference. Any area with a BII above 90% is considered to have enough biodiversity to be a resilient and functioning ecosystem.
Between 30% and 90%, the degree of biodiversity loss means ecosystems may function less well and less reliably. Below 30%, biodiversity is so depleted that the ecosystem is at risk of collapse.
To put this all into perspective, as of November 2022, the UK’s average BII score is 53%. Globally in 2022, the BII is around 77%, with the United States at 69% and Singapore 34%, as other regional examples.
How did the asset measure up?
abrdn asked NHM to pilot the tool at Far Ralia, a site of more than 1,440 hectares in the Cairngorms National Park in Scotland, which is held in one of abrdn’s real assets investment strategies.
The site was chosen due to its size and planned restoration objectives of creating one of the largest native woodland creation and peatland projects in the UK to achieve a positive climate, nature and social impact.
abrdn wanted to ensure that the project met its specific biodiversity target in line with its seven principles for high-integrity nature-based investing that are aligned and supportive of the Scottish government’s Interim Principles for Responsible Investment in Natural Capital.
The NHM modelled the current BII score of the site. Despite it being open land and perceived as ‘green countryside’, its historic use for grouse shooting, meant that it only scored a BII of less than 52%.
NHM then modelled the restoration plans for the site over the short, medium and longer term. The results showed a significant improvement taking the depleted landscape up to 73% in just 30 years and eventually 94% over the longer term.
Far Ralia Biodiversity Intactness Index (%)
Key observations
This collaboration and pilot study identified that:
- The BII is a robust indicator that, unlike many other biodiversity indicators, is able to provide a modelled view on how an area of land will respond due to planned activities;
- The BII can be used to model the impact of a range of use cases including, but not limited to, regeneration projects, real estate assets, infrastructure development and changes in farming practices;
- A suite of metrics is required to fully assess and understand the condition of ecosystems. The BII can provide one way to measure biodiversity and can do so globally, at scale, and in line with the planetary boundaries – defining the safe operating space for sustainable human activity(2).
- Dasgupta, P (2021) The Economics of Biodiversity: The Dasgupta Review
- Rockstöm et al (2009) A safe operating space for humanity.