UK-based investment manager Ninety One has launched the Sovereign Biodiversity Index to help investors assess national-level nature risks.
These risks can affect economic performance, particularly in emerging markets that often rely heavily on natural resources due to their focus on agriculture, said Ninety One, which managed over £128 billion ($166 bln) in assets as of the end of June.
“As sovereign debt investors, we need a practical way to assess how governments impact nature and the risks stemming from biodiversity loss,” said Peter Eerdmans, co-portfolio manager of emerging market sustainable blended debt.
“They can significantly influence economic performance and consequently a nation’s ability to service its debt.”
By understanding the risks, investors can direct capital towards nations doing the most to safeguard biodiversity, the investor said.
THE RESULTS
Ninety One scored 116 countries on nature risk between zero and one. Slovakia came in first place, while Singapore was last, it said.
European nations dominated the top rankings, with seven of the top 10 spots, reflecting stable biodiversity trends in line with EU-led rewilding efforts, it said.
Venezuela ranked in second place, benefiting from a drop in deforestation and high levels of protected territory.
However, illegal mining in Venezuela has led to significant environmental concerns, the investor said. “This underscores the importance of conducting qualitative analysis alongside index-data assessments.”
At the lower end of the rankings, the Philippines came second-last, as it faces severe biodiversity challenges due to population growth and poverty, which drive resource over-exploitation, the investor said.
The Filipino government recently enacted various environmental protection laws, including a National Greening Program, yet protected areas only cover 3.7% of the country, the investor said.
THREE PILLARS
The index is structured around three pillars: quality of nature, deforestation, and policy. It lacks a pillar on biodiversity loss due to limited data.
Data sources include Yale’s Environmental Performance Index, the Biodiversity Intactness Index from the Natural History Museum, and the Ocean Health Index.
The index gathers information from the share of tax revenue that is environmentally related according to the OECD, and protected areas from the World Bank.
In 2020, Ninety One launched the Climate & Nature Sovereign Index, which assesses the long-term risks relating to climate change and nature loss.
By Thomas Cox – t.cox@carbon-pulse.com
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