Biodiversity impact and ecosystem service dependencies

Ecosystem services are vital for all kinds of economic activities from medicine to energy sector and biodiversity underpins all ecosystem services. However, it is globally decreasing at an alarming rate. Meanwhile, there is a growing awareness for biodiversity and ecosystem services. The publication of the IPBES report, the Indebted to Nature report of the DNB and PBL and the Dasgupta Review shed light to the degradation of nature. These reports have also underlined the role that financial community can play in stopping the loss of biodiversity and restoring thereof

By making use of biodiversity footprint measuring, financial institutions can assess their impact on biodiversity. Minimising the impact will reduce biodiversity loss and the risk which is associated with high impact operations. Different types of risks are associated with dependencies on ecosystem services. Combining profiles of biodiversity footprint and dependencies can help financial institutions understand the two different sides of their relationship with nature at the same time.

So far, biodiversity footprinting was limited to measuring impact on biodiversity and assessments of dependencies exclude this impact. In this report (please see the link below), the method Biodiversity Footprint for Financial Institutions (BFFI) for biodiversity footprinting and the tool and database of ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) for the assessment of ecosystem services are connected. The aim is to provide financial institutions with a better understanding of their relationship with nature by combining impact and dependency data. 

This new method was tested with 25 companies in the AEX index. It resulted in an overview of the number of ecosystem services which a financial institution depends on, the type of ecosystem services involved, and their materiality and a weighted materiality based on the contribution of these ecosystem services to the sales of a company.

Following the initial test with the AEX index, combining the BFFI method and ENCORE tool & database can now be used to conduct a dependency and impact assessment at the same time for an investment portfolio of a financial institution. The  findings in the report can be used to zoom in on biodiversity hotspots and to develop or adjust a biodiversity policy. The results help to focus engagement with the right companies. This combined method helps financial institutions to create their impact and dependency profiles which can be used for displaying the extent of how they may impact the ecosystem services they depend on. Finally, insights from this combined method can help to develop or adjust investment criteria and to inform investment decisions for divesting or for investing with a positive impact on biodiversity.

This study shows once again that there is a growing need for reliable data for measuring impact on biodiversity and dependency on ecosystem services. Particularly, transparency and disclosure of environmental data in supply chains is key to both impact and dependency assessments. Therefore, the availability of supply chain data should be increased. Availability of ecosystem services a company also depends on its location. Therefore, for a more accurate measuring of dependencies on biodiversity and ecosystem services, location-specific data is of great importance.

For a follow-up study it is recommended to include both direct and indirect dependencies in the assessment. This will help to further improve the accuracy of the impact and dependency scores.