Conquering the biodiversity data challenge
MSCI’s head of biodiversity products Veronique Menou Lieblich outlines the critical challenges facing investors in understanding biodiversity loss and collecting related data.
For more information see: www.msci.com/biodiversity.
Environmental Finance: Can you tell me about your role at MSCI?
Veronique Menou Lieblich: I’m part of the ESG product team based in Paris. I have been with MSCI for 12 years – I moved over from the research side of the business to the product side last summer to focus on new biodiversity solutions for MSCI’s clients, as well as continuing to work on ESG and regulatory solutions globally.
EF: How is MSCI helping investors measure impact and manage biodiversity risk?
VML: MSCI has spent decades developing metrics and data for investors to measure risks and opportunities related to climate change and other ESG issues. We have applied that experience and expertise to the biodiversity space. We are building new tools that overlay our existing ESG data to isolate risks and identify opportunities related to or resulting from biodiversity loss. In the past year, we have also produced several research pieces on biodiversity loss from different sector perspectives, such as food, mining, and agriculture, etc., which serve as a foundation to develop tools that can help investors measure biodiversity risks.
EF: What are the critical data challenges in understanding the financial implications of biodiversity loss?
VML: Nature and biodiversity risk is a very complex area despite the multitude of academic studies that are being undertaken on the impact of human activities on biodiversity. Much is still being learnt about the complexity of processes and interdependencies within ecosystems. In addition, scientists estimate that 80% of our planet’s species remain undiscovered. This poses an additional challenge when assessing nature-related impact and risks.
Furthermore, while there is a common understanding on how to model climate change risk, there is no consensus on how to measure biodiversity risks or what the tipping points are for the collapse of ecosystems.
Aside from the model-related challenges, there are also data limitations for measuring biodiversity risks within supply chains. A company who relies on thousands of suppliers faces great challenges to collect and aggregate data for risk in each supply chain. The development and further refinement of tools and frameworks to better assess impact and risks as well as nature-related dependencies is a crucial and central task for the investment community.
At the same time, such challenges should not be considered an excuse to ignore the issue. Despite these limitations, MSCI ESG Research is already providing tools, metrics, and data to help investors assess biodiversity-related risks and opportunities.
EF: How does MSCI’s data equip investors to address nature-related risks and incorporate biodiversity assessments?
VML: We see several different needs in this area. Some investors might be looking to measure and mitigate the risks associated with biodiversity loss and report in line with the Taskforce on Nature-related Financial Disclosures (TNFD), Sustainable Finance Disclosure Regulation (SFDR) or France’s
Article 29 on biodiversity disclosure requirements. Others might be more focused on engaging with companies as shareholders to encourage progress on biodiversity issues.
We provide access to over 300 metrics related to biodiversity and natural capital to help investors undertake these tasks. Our ESG ratings include quantitative and qualitative data as part of biodiversity-linked assessments. Our ESG controversy tool is designed to help investors identify companies involved in controversies related to biodiversity loss, and our sustainable impact metrics and ESG-alignment tool helps investors identify companies with the potential to counter biodiversity loss through sustainable agriculture, or pollution, prevention and control.
Earlier this year, we also launched biodiversity sensitive areas and deforestation screening metrics. These are designed to help investors address biodiversity risks in their portfolio or manage reputational risk by identifying companies with operations in ecologically sensitive areas or with exposure to direct and indirect deforestation.
These tools combine thousands of assets points overlaid with our location-specific biodiversity metrics to add greater clarity and focus for investors.
EF: What are your next steps and priorities in this area?
VML: We will further explore ways to help investors meet the growing demand for biodiversity data and tools, particularly within the context of SFDR reporting and TNFD. An example is our new collaboration with NatureAlpha, a UK-based nature and biodiversity analytics company. With them we are exploring the development of new methodologies and tools that should augment MSCI’s existing offering on biodiversity data and analytical tools.
