The need for urgent action
Nature plays a critical role in sustaining life. The ecosystems of the land and ocean give us fresh water, air, food and medicine, and can absorb a significant amount of our harmful emissions. However, they are being destroyed by human activity and climate change. Biodiversity loss is accelerating at an alarming rate: wildlife populations have plummeted by 69% since 1970¹.
This poses significant risks to the integrity of natural ecosystems and the sustainability of human societies.
The financial sector is not immune to these risks; it is estimated that over half of global GDP depends on ecosystem services². These ecosystem services include the provision of essential resources such as food, wood or water, for example, but also play a role in regulating biodiversity such as services relating to the climate, water purification, soil fertilisation and pollination. Scientific literature is increasingly documenting the effect of human activities on biodiversity loss, and future works will teach us more, for example about how impacts differ depending on geography.
A strong regulatory focus
Initiatives have multiplied in recent years to raise awareness among decision-makers about biodiversity issues and to better understand their interdependencies with the economy and with the financial sector specifically.
The 15th Conference of the Parties (COP15) on Biological Diversity, held in Montreal in December 2022, led to the first agreement on a global framework for biodiversity conservation. This framework allows, among other things, the setting of initial quantified objectives for ecosystem protection and biodiversity financing. As a result, financial institutions and companies are encouraged to monitor and disclose their risks and negative impacts on biodiversity.
Financial regulators require that financial institutions assess nature-based financial risks and their own impacts on nature. Several governments and regulators are already part of the Taskforce on Nature-related Financial Disclosures (TNFD).
The EU has launched a biodiversity strategy for 2030, an ambitious and long-term plan to protect nature and reverse the degradation of ecosystems. The strategy aims to put Europe’s biodiversity on a path to recovery by 2030, and contains specific actions and commitments.
The protection and restoration of biodiversity is also one of the main objectives of the EU Green Taxonomy and requirements set up under the Sustainable Finance Disclosures Regulation (SFDR). This principle is also supported by ESG regulations such as SFDR and the MiFID II Sustainability amendment.
Euronext Biodiversity Enablers World index: Measuring double materiality
Tackling the preservation of biodiversity is a key topic at Euronext. After the successful launch of its first biodiversity indices, Euronext has added the Euronext Biodiversity Enablers World index to its biodiversity index family, an innovative index measuring the double materiality assessment.
Designed to support the growing demand for climate-oriented solutions, particularly linked to the area of biodiversity, the Euronext Biodiversity Enablers World index is the first world benchmark highlighting the positive impact that companies can have on biodiversity, and measuring the double materiality assessment of companies worldwide. Constructed in collaboration with Iceberg Data Lab, the methodology leverages on two new innovative metrics:
A dependency exposure score which allows the identification of companies that have revenues which are highly dependent on biodiverse ecosystems
A biodiversity avoided impact which identifies companies demonstrating best practices in biodiversity and environment impacts.
The index also excludes companies involved in plastics, pesticides and unsustainable palm oil industries. The index is currently composed of 121 companies from world developed countries.
Recognised expertise on biodiversity and ESG
Since 2020, Euronext has offered a full suite of biodiversity indices that are tracked by a number of ETFs and structured products.
Euronext expertise on biodiversity is widely recognised, and in 2023 Euronext was awarded “Biodiversity Index of the Year” at the SRP Europe Awards and the “Excellence Award for Robust Biodiversity Solutions” at the Wealth & Finance Ethical Finance Awards.
Euronext has nearly 40 years of experience designing, calculating and publishing a wide range of indices of all sizes and profiles, making it one of the leading index providers in Europe. In the field of climate indices, Euronext is a pioneer, having launched its first low-carbon index in 2008, one of the first in the world. It now administrates over 350 ESG indices that are widely used as underlyings for innovative ETFs and structured products.
As part of its ESG offer, Euronext provides a range of sustainable index solutions such as the Euronext SBT 1.5° indices, validated by the Science Based Targets initiative (SBTi); indices aligned with EU Climate benchmarks such as the Paris-Aligned Benchmarks (PAB) and Climate Transition Benchmarks (CTB); indices focused on environmental goods and services; positive impact water, hydrogen and wind and solar indices. The new Euronext Biodiversity Enablers World index is the latest innovative climate-focused index to join the Euronext climate index family.
Euronext’s mission is to connect European economies to global capital markets, to accelerate innovation and sustainable growth. Euronext will continue to develop new indices with its customers, for its customers, to shape capital markets for future generations.
Find out more: https://www.euronext.com/en/news/euronext-biodiversity-indices
1. WWF, 2022 2. World Economic Forum, 2020
This article was first published in ESG Unlocked: Is it time to draw the curtain on 'ESG'?, an ETF Stream report. To read the full report, click here.
Euronext NV, as a leading European market infrastructure, exchange operator and index provider, has pledged to align its own greenhouse gas emissions with the 1.5°C global warming limit – the most ambitious climate target set by the Paris Agreement. This commitment was also made through the Science Based Targets initiative (SBTi), which helps companies determine how their operations can stay within the bounds of a sustainable future. By taking these steps, Euronext hopes to demonstrate leadership in combating global warming and encourage other firms to follow suit
