Finance and Biodiversity: Putting Scenario Analysis to the Test in the Real World
Finance and Biodiversity: Putting Scenario Analysis to the Test in the Real World
Within the framework of the Think Tank “2030 Investir demain,” the working group co-founded by Candriam in partnership with the media outlets ID L’Info Durable and L’AGEFI focuses on “the implementation of a granular and comprehensive analysis that integrates issues related to the geographical location of activities.” In this context, Alix Chosson, ESG analyst specializing in Climate & Environment, and Elouan Heurard, ESG analyst specializing in Biodiversity at Candriam, examine the crucial topic of scenario analysis in this article.
The integration of biodiversity into economic decision-making is progressing—albeit slowly. One of the main points of friction today centers around a term well established in the climate field but still unclear when it comes to biodiversity: scenarios.
How can we anticipate biodiversity changes over the coming decades? What tools are available to project its impacts on value chains, assets, or business models? These questions highlight an increasing tension between technical sophistication and operational relevance.
Scenarios — But For What Purpose?
Scenarios have become a standard exercise. They are produced to comply with regulations, reassure investors, and respond to regulators. Yet their primary function should be quite different: to test the robustness of a business model under uncertain futures.
In practice, many companies still present optimistic trajectories, lightly stressed and often disconnected from physical or ecological dynamics. The challenge is less about forecasting and more about questioning. Simulating different trajectories — agricultural intensification, water stress, regulatory evolution, dietary transition — helps identify vulnerabilities and tipping points.
The Pitfall of the Average
Scenarios often lack granularity. While global models are indispensable, they mask local dynamics — whereas biodiversity is inherently location-specific. Ecological pressure on an endemic ecosystem does not have the same significance as a diffuse impact on a standardized environment.
It is therefore essential to ask precisely what a company does, where, and how. Only under these conditions can physical risks, territorial dependencies, and action levers be properly assessed.
Multiple Models, Divergent Outcomes
One single model is not enough. Depending on whether GLOBIO, PREDICTS, or the Living Planet Index[1] is used, the same scenario can produce radically different results. Some tools forecast gradual regeneration, others irreversible decline. This alone underscores the importance of cross-referencing approaches, clarifying assumptions, and not relying on a single analytical framework.
Scenarios should help identify impact transfers, systemic effects, vulnerability zones, or areas of overpressure. They cannot be considered neutral projections: they are tools for questioning, not guarantees of robustness.
Toward a Projected Ecological Debt?
Just as the “carbon budget” has structured climate thinking, one can imagine a biodiversity budget or ecological debt associated with an economic trajectory. By modeling the current footprint of a portfolio or company, then projecting it into different futures, one obtains a dynamic view of risk.
But this is not about finding a magic indicator. MSA (Mean Species Abundance) or BII (Biodiversity Intactness Index)[2] alone are insufficient. Complementary metrics — land footprint, water consumption, artificialization — can make this reading more granular and operational. The key is to use these data wisely, incorporating uncertainties instead of masking them.
Physical Risks, Transition Risks: Two Angles to Combine
Today, few analyses articulate both physical risks (ecosystem service degradation, resource scarcity, ecosystem instability) and transition risks (regulatory changes, technological innovations, shifts in social preferences).
Yet this dual perspective enables anticipation of costs, prioritization of action levers, and highlights that a managed transition costs far less than a sudden collapse. Finance must integrate both dimensions — and recognize their interdependence.
Thinking of Biodiversity as a Dynamic Process
Biodiversity is not just a stock to be preserved but a living dynamic to be supported. This implies accepting complexity, acknowledging uncertainty, documenting assumptions, and varying approaches. It also demands scientific humility and analytical rigor.
Scenarios must not become tools for validation or self-justification. They are not meant to prove that everything is fine. Their true value lies in the tensions they expose, what they reveal, and sometimes what they challenge.
[1] The GLOBIO and PREDICTS models measure local terrestrial biodiversity integrity. The Living Planet Index measures relative population size changes of various species compared to 2010.
[2] MSA (Mean Species Abundance) and BII (Biodiversity Intactness Index) measure the relative loss of ecosystem integrity—that is, the extent of alteration or transformation of primary ecosystems into areas with reduced biodiversity value compared to an undisturbed state.
