Ninety One has launched a Sovereign Biodiversity index, providing a quantitative way for investors to assess nature and biodiversity risks at a national level.
The index comprises of three pillars: quality of nature, deforestation and policy. It incorporates data sources on nature and biodiversity from Yale’s Ecosystem Vitality index, which makes up part of Yale’s Environmental Performance index.
The firm will incorporate this data into the index, building on it to include: (i) more data, such as the Biodiversity Intactness index, developed by the Natural History Museum, (ii) a policy pillar, which includes progress made on relevant Sustainable Development Goals (SDGs) and environmentally aligned taxes, (iii) and a greater focus on five-year and 10-year trends.
Across the three pillars, the index provides an overall score for each country. Slovakia was ranked first, with a score of 0.84, with Venezuela closely second at 0.81, scoring highly on indicators of ecosystem vitality and ocean health. Further, the index found that deforestation has been on a downward (i.e., positive) trend, with the latest data for 2022 showing the lowest amount of deforestation in over two decades.
The index is the third quantitative tool introduced by the firm as part of its ESG assessment framework. It follows the 2020 launch of the Climate and Nature Sovereign index, which assesses the long-term risks of climate change and nature loss at a country level, and the 2021 launch of the Net Zero Sovereign index, which assesses countries’ progress towards net zero.
Peter Eerdmans, co-portfolio manager, EM Sustainable Blended Debt, said: “As sovereign debt investors, we need a practical way to assess how governments impact nature and the risks stemming from biodiversity loss.
“They can significantly influence economic performance and consequently a nation’s ability to service its debt. This is particularly key for investors in emerging markets, where economies often rely heavily on nature, partly because of the relative importance of the agricultural sector.
“Seven of the top 10 are European countries. This reflects stable and even improving trends in biodiversity intactness in some countries, which is counter to the global trend. Rewilding efforts and improved legal protections across the European Union have been relatively successful, as highlighted in a report co-authored by ZSL and BirdLife International in 2022.”
