“The localization of business activities is important for providing ecological context around their impacts.”
“The localization of business activities is important for providing ecological context around their impacts.”
In the fall of 2024, the media outlets L’Agefi and ID, l’Info Durable launched the “2030, Investing for Tomorrow” Think Tank with the aim of fostering discussions and uniting financial actors around the major issues of sustainable finance. This initiative brings together six thematic working groups, which will meet every two months to exchange ideas, formulate solutions, and propose concrete actions. Today, we focus on the first workshop of the “Biodiversity” group, co-founded by Candriam, featuring an interview with Elouan Heurard, ESG climate and biodiversity analyst at Candriam.
Can you briefly remind us of the objectives of this working group?
The main objective is to design a practical guide for investors and financial institutions to help them integrate biodiversity into their investment decisions. This is a very broad topic that can be approached in various ways, and the goal is to present a structured framework, based on existing work, to guide investors in selecting indicators and engaging with companies through shareholder activism.
What methodology have you implemented at Candriam to assess the biodiversity footprint of companies?
Our method involves mapping the production assets of the companies we analyze, tracing their value chains as much as possible, especially for sectors such as agribusiness. Once this mapping is established, we overlay local environmental data: biodiversity status, water situation, forest conditions, endangered species count, proximity to protected areas, etc. This allows us to assess the specific biodiversity challenges related to each asset. For example, for a mine, we focus particularly on the water situation in the region. For agricultural crops, we pay more attention to forest evolution.
Next, we place these challenges in the context of the company’s policies: governance, objectives, progress made, dedicated funding, etc. This helps assess whether the company’s management is adequately addressing the identified challenges.
Why is the location of a company’s activities an important factor when measuring its biodiversity footprint?
Unlike the carbon footprint, which can be expressed in CO2 equivalent tons and is not necessarily dependent on the location of emissions, the biodiversity footprint introduces an additional layer of complexity. It measures the damage caused to the environment, and it is meaningless to use indicators detached from their reality; they must be placed in their ecological context. For example, consuming water in a desert has a different impact than in a forest, both for the ecosystem and local populations.
Therefore, location is crucial for adding ecological context to the company’s impacts. It allows us to position production assets against the challenges they face, identify the risks to prioritize, and structure constructive dialogue.
How is this analysis integrated into management decisions?
Initially, this analysis may lead to exclusions. For example, we systematically exclude certain economic activities from our sustainable funds that are deemed incompatible with sustainability objectives, such as pesticide or GMO production.
Next, biodiversity analysis is broken down into several themes: water, protected areas, fauna, flora, etc. If a company has critical exposure to one of these themes that is poorly managed, it is also excluded. This analysis further contributes to the overall ESG rating of companies, and an insufficient score may lead to exclusion.
These data also serve as a foundation for our engagement actions. For example, we participate in collaborative initiatives with other investors, such as the Nature Action 100 and FAIRR coalitions. We share our analyses to structure shareholder dialogue and demand tangible progress from companies, such as the development of an ambitious water management plan or the publication of biodiversity impacts associated with their activities. We can also target specific cases, highlighting particularly problematic sites to encourage improvements.
We also conduct direct engagement actions with companies, particularly regarding the location of assets along the value chain. For example, we are currently engaged on the palm oil issue with several players, and this geographical analysis allows us to identify assets located in high-risk areas or compare the policies of companies in the sector. This helps us highlight best practices and encourage others to adopt them.
What are the main challenges you face today when evaluating the biodiversity footprint of companies?
On the localization of operations, we sometimes encounter a certain opacity from companies, and this difficulty increases as we move up the value chain. We have adopted a raw material-based approach: some are subject to specific regulations (such as soy and palm oil), which gives us access to location data. However, this is not always the case, and some value chains remain very opaque.
Regarding biodiversity data, another challenge lies in its interpretation. For example, what reference state should we base ourselves on? Should we measure soil degradation relative to 2020 or the start of the industrial era? Interpretation is a complex process, but we rely on scientific literature and place great emphasis on transparency, as it is crucial to justify our choices and prove that they are not arbitrary or biased, but grounded in solid and relevant logic.
Globally available data are often less precise than local data, which can lead to approximations. Therefore, we try to collect as much data as possible to identify converging trends and provide reliable insights into the state of biodiversity in the analyzed areas.
Finally, while we’ve discussed data collection and interpretation, another important issue is how to represent these results, especially regarding location. What data should be highlighted? What type of projection should we rely on? How can we make them accessible to investors? This is still an ongoing reflection, but we’ve already started incorporating this data into our publications. Our goal is to publish the biodiversity footprint of each of our funds. In our TNFD report, we plan to publish indicators related to, for example, the biomes to which our funds are exposed.
What levers could help improve the accuracy of corporate biodiversity analyses?
We are relying heavily on new disclosure frameworks dedicated to biodiversity. For example, the TNFD (Taskforce on Nature-related Financial Disclosures) has incorporated the “LEAP” approach (Localize, Evaluate, Analyze, Prepare), where the first step emphasizes the importance of locating assets to conduct relevant biodiversity analysis.
In Europe, the CSRD (Corporate Sustainability Reporting Directive) also brings advances, notably with the ESRS E4 standard, which will require companies to disclose the location of their assets. We do not yet know how these data will be presented, but we hope that this regulation will enhance corporate transparency.
What do you take away from this first workshop?
It was very interesting for us. We have been developing our model for almost three years, and exposing our work to external perspectives is essential. Bringing together scientists and analysts specialized in corporate biodiversity footprints around the table allows us to broaden our perspective and explore different approaches. Biodiversity is a complex and multidisciplinary issue, so it is necessary to have different perspectives—scientific, academic, corporate, and public— to navigate this complexity successfully.
Content written by Max Morgene.
