Financial Services

eDNA-based biodiversity assessment can help to reduce biodiversity related finance risks and support investment in positive outcomes for nature

Over half of the world’s GDP is dependent on nature and the ecosystem services that it provides. Businesses and governments globally are recognising that we cannot contain global warming to 1.5°C without addressing nature loss. It is of critical importance that the finance sector takes steps to help protect our natural resources. This will help safeguard investment and financing activities delivering a win-win for nature, climate, people and the economy.

eDNA-based biodiversity assessment can have applications in impact frameworks and reporting, project-related finance, risk management, sustainability-linked finance and ESG evaluation. Read more below on how NatureMetrics can work with you in each of these areas.

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Impact frameworks and reporting

eDNA-based assessment can be integrated into impact frameworks to assess the performance of investment and financing activities.

We can provide:

Analysis and interpretation of species composition changes – including protected, invasive, iconic species

Metrics and KPIs to assess impact on species, water health and soil health

Assessment of progress towards restoration targets

Assessment of progress towards net positive impact

The results can be used to provide positive narratives for use in impact and sustainability related reporting and investor engagement, by providing evidence of achievement of target outcomes. A particular benefit of using eDNA based sampling is that anyone can take a sample using our kits. This allows local contractors and even local communities and stakeholders to get involved – delivering new skills and supporting independent monitoring of outcomes which can be of particular importance to some projects.

Project-related finance: Environmental Impact Assessment/Due Diligence

eDNA-based monitoring is designed to provide biodiversity data at scale on species ranging from bacteria to blue whales. It can support project-based finance by establishing a biodiversity baseline to inform investment and financing decisions and provide ongoing performance assessment.

We have conducted analyses across the globe in a range of environments – from deserts and savannas to wetlands and forests and to coastal and deepwater offshore marine environments. Our sector expertise includes infrastructure, energy and extractives as well as experience in terrestrial, inshore and offshore applications.

eDNA-based monitoring can:

Support adherence to the mitigation hierarchy – a tool which is used to avoid and minimize any impacts on biodiversity, particularly protected species, as well as to monitor any restoration activity required.

Reduce the likelihood of costly design changes by being used as part of initial screening/baselining so it can inform project design.

Reduce the risk that protected species are missed due to Environmental Impact Assessments being designed around out-of-date local information on their presence.

Provide supplementary analyses in support of Due Diligence – where existing EIAs are seen to be incomplete or inadequate, we can provide further assessment with a rapid turnaround.

Reduce losses arising from environmental liability and associated reputation risks by screening for protected species in and around proposed developments.

Reduce costs by enabling water, soil and sediment samples to be taken by any onsite contractor. This reduces the need to engage different taxonomic experts on site over lengthy periods.

Reduce health and safety costs because there is no need to get into the water to take samples.

Supports disclosure/reporting on commitments and pledges including IFC Performance Standard 6, ESS6, PRI, PRB, Sustainable Development Goals (15/16).

Enable independent monitoring by local stakeholders which can enhance community relations and third-party auditing.

Learn more about eDNA-based monitoring

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Risk Management

Awareness of the impacts and dependencies of the financial sector on nature and biodiversity has created a need to integrate biodiversity related assessment into risk management Those companies that are managing and mitigating biodiversity-related risks well are the most likely to preserve capital now and in the future.

eDNA based biodiversity measurement can support better management of:

Physical risks

Healthy ecosystems are more productive and resilient than degraded ones. They provide higher yields, store more carbon, and can protect us from climate-related shocks such as flooding and drought. An understanding of community composition(the number of species in a given site and their relative numbers) can provide insight into ecosystem health, including soils and agriculture, mangroves/corals, fisheries and pollinators. In turn, this can help assess the risk to revenue.

Transition risks

Rising demand to ensure positive outcomes for nature is driving policy, legal, technology and market changes, and getting ahead of the game by building knowledge of your company’s potential biodiversity impacts reduces the risk of sudden unexpected exposure from regulatory change. For example, there is a growing risk of stranded assets in locations where protections for nature are increased in the future.

Liability and reputational risk

The ‘polluter pays’ principle means that restoration costs could be high where areas of high biodiversity are damaged and there could be associated risks to reputation.

Financial risks

Reduced transition, physical and liability risks translate into reduced exposure to market, credit and operational risks. Regulators are increasingly calling for these to be factored into regulatory and economic capital quantification e.g. TNFD, NGFS.

Whilst the need to assess risk has been identified, the financial services sector is still determining the most appropriate data and metrics to support assessments. eDNA sampling provides data at scale for different taxonomic groups, and samples can be stored and reanalysed at a later date. This provides greater confidence of having the right data to support future reporting, whilst supporting the development of new and proprietary analytics.

Sustainability-Linked Finance

Linking finance to the delivery of positive outcomes for biodiversity has the potential to deliver a huge impact. Whether green, blue, sustainable or sustainability-linked, biodiversity-related KPIs can be tied to a variety of asset classes including bonds, loans, revolving credit facilities and derivatives.

Talk to us about developing metrics and KPIs unique to your project to allow finance to be tied to the achievement of biodiversity-related targets.

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ESG evaluation of biodiversity

Companies with higher ESG scores generally outperform those with lower ones. Encouraging investees and other counterparties to monitor their impacts on nature should be seen as an integral part of financial services activity to protect capital and preserve returns. Demanding disclosure will also make it easier to identify industry leaders and laggards.

In the absence of onsite biodiversity assessments, the market may estimate companies’ impacts from desk-based research, AI algorithms or footprinting tools based on the companies’ sector and activity. However, this is not a measure of actual impact. Companies in the same sector/location with similar activities can end up with similar scores. This creates a risk of unknowing exposure to companies whose performance is below-average, and an inability to identify companies that are above-average and lower risk. Our services can mitigate against this by providing evidence of active biodiversity management and impacts for in-house research and rating activities as well as to external data/ESG providers.

We are developing global datasets that will support assessment at scale and are looking for partners interested in developing these tools and applications.

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