Biodiversity in ESG

The Dasgupta Review (Dasgupta 2021) shows that the economy and the financial sector are embedded in and dependent upon the biosphere: nature and biodiversity. To be sustainable and respect planetary boundaries, economic development and the allocations of capital facilitated by the financial sector must therefore reflect this embeddedness and account for the comprehensive (including natural capital) wealth. With this ultimate purpose in mind, many mechanisms have been deployed in the financial sector. For example, the Taskforce on Nature-related Financial Disclosures (TNFD) is now being developed to guide the disclosure of information on the financial implications of nature-related risks. Analysts and investors who want to avoid biodiversity and other nature-based risks or engage in environmental conservation use ESG as a key resource to evaluate portfolios. (Cao et al., 2020) However, past research shows evidence that ESG does not appear to achieve its purpose. (Berg et al., 2020).
The so-called "double-materiality" (Boissinot et al., 2022) of biodiversity risks and impacts have little effect on decisions in the financial sector. Understanding how biodiversity is measured and delivered in the financial market is crucial to further integrate biodiversity into finance and contributing to biodiversity conservation. ESG is becoming an important tool that contains biodiversity metrics in the market.
BIO-ESG will contribute to integrating biodiversity into finance by investigating the "double materiality" relationship between biodiversity and finance. It will focus on two perspectives.
The research will analyse 1) how typical ESG-orientated investment behaviour affects biodiversity scores, portfolios and engagement with biodiversity-exposed firms. 2) the financial incentives for investing in companies that score highly on biodiversity.