Future of Sustainable Data Alliance (FoSDA) presents its special paper on biodiversity and natural capital datasets as the UN Biodiversity Conference (COP15) kicks off in Montreal, Canada.Continue reading
As part of COP27, FoSDA has launched its review of the corporate and sovereign ESG datasets that are the most critical for improving sustainability disclosure and analysis.Continue reading
FoSDA Taxonomy Workstream updated its international overview: Taxomania!Continue reading
New report on sustainable finance, data and ESG — FoSDA’s highlights, workstream outputs and focus areas.Continue reading
FoSDA is delighted to present its package of reports examining the global ESG data space from two of its most pertinent aspects: ESG data gaps & holes and forward-looking ESG data.Continue reading
The following is a part of FoSDA’s workstream on Taxonomies – Last updated September 2021.Continue reading
This article was written by Sherry Madera, Chief Industry & Government Affairs Officer at Refinitiv. It was first published as part of the World Economic Forum‘s Davos Agenda.Continue reading
Asia Securities Industry and Financial Markets Association (ASIFMA), in cooperation with the Future of Sustainable Data Alliance (FOSDA), released a paper titled “ASIFMA-FOSDA Report on Data Challenges and Opportunities for ESG and Sustainable Finance in APAC” – a result of a year-long review of sustainability data challenges facing the industry in the Asia Pacific.
The paper follows from an interim report published in September 2020, and is based on discussions with market practitioners, industry representatives, standard setting bodies, as well as online events with regulators and sustainability specialists.
Some of the key ESG drivers and issues identified through a poll conducted earlier in the year, as well as through the online discussions facilitated by ASIFMA and FoSDA, include the increasing focus on ESG factors in light of Covid-19, the sustainable financing gap in Asia, inconsistent ESG data and lack of standardisation, as well as the need for policy and regulation to support innovation when solving data challenges.
“Another aspect of this is capacity building. With regard to sustainability, we’re really dealing with a complex, multi-dimensional issue and as ASIFMA has highlighted for some time, on sustainable finance, policies and industry efforts are needed to build capabilities across financial and other sectors in relation to scientific, operational, risk, reporting, governance, commercial and technological dimensions of ESG and sustainability,” said Matthew Chan, Head of Policy and Regulatory Affairs at ASIFMA.
Based on the review of these issues, ASIFMA puts forward 8 key recommendations, seen as critical to enabling the development and scaling of sustainable finance:
- A greater convergence towards a principles-based global (or at least regional) taxonomy.
- Higher, more consistent corporate disclosure standards between jurisdictions and sectors.
- Encouragement of higher standards of analysis, with incentives for more holistic and robust approaches to ESG measurement and analysis.
- Policy and regulation to support innovation and technologies that enable ESG and sustainable finance capabilities.
- A focus on education and skills to support ESG and sustainable finance capability.
- Higher standards and accountability for ESG ratings providers, potentially including regulation, and clear and harmonised requirements for product disclosure.
- Harmonisation between ESG standards and frameworks such as UN SDGs, and policy on climate change and bank supervision at systemic level, including on climate risk.
- Ongoing partnership and dialogue between the public and private sectors, as well as between stakeholders such companies and investors on disclosure and reporting standard.
The full ASIFMA press release can be found here.
ASIFMA is an independent, regional trade association with over 140 member firms comprising a diverse range of leading financial institutions from both the buy and sell side, including banks, asset managers, law firms and market infrastructure service providers.
ASIFMA is a partner of the Future of Sustainable Data Alliance (FOSDA) and is leading the workstream to understand data challenges for environmental, social, and governance (ESG) and sustainable finance in the Asia-Pacific region.
Launched at the World Economic Forum in January 2020, the Future of Sustainable Data Alliance brings global partners together to seek to solve the question of what data investors and governments need to meet the 2030 climate targets? Founding partners include the World Economic Forum, United Nations, IIF, OMFIF, Tsinghua University, ASIFMA, GFMA, Climate Bonds Initiative, FinTech4Good, Everledger, Institute of Public and Environmental Affairs, Spatial Finance Initiative, Bank of Africa-BCME and GoImpact, with membership growing with the recent addition of Icebreaker One.
Contact details: email@example.com
FoSDA has launched its initial recommendations for best data practices for global future transition to a carbon-neutral, sustainable economy.Continue reading
Biodiversity loss poses one of the biggest risks to financial institutions. However, investors are not aware or have a poor understanding of its impacts. A Future of Sustainable Data Alliance (FoSDA) webinar highlighted biodiversity risks and discussed how they can be better integrated into investment portfolios.
- The World Economic Forum’s 2020 Global Risks Report ranked biodiversity loss as one of the five top risks of the next decade. However, few investors fully understand or are aware of its potential impact on investment portfolios.
- Experts at a FoSDA webinar considered the current and future states of biodiversity risk and analyzed future policy landscape and the industry response.
- In the face of COVID-19, what biodiversity lessons can be learnt for the future?
Much like climate change a few years ago, biodiversity-related risk is a liability that is currently poorly understood by investors and is omitted from most financial institutions’ balance sheets.
It is widely accepted that climate change already has a material impact on investment performance for some sectors and firms, and poses a systemic risk to financial stability.
However, very few financial institutions manage, understand or are even aware of the risks concerning biodiversity.
More complex to measure and spatially differentiated, biodiversity or nature-related risks are systematically mispriced, leading to poor allocation of large pools of capital — especially in land-based sectors — and exposure for the financial sector.
The crisis in biodiversity
Nature has suffered a pandemic-like crisis for over a century.
Human activity has accelerated the rate at which plant and animal species are becoming extinct by a factor of over 100, and paved the way for a growing climate crisis.1 This activity threatens about 25 percent of assessed plant and animal groups, with one million species facing extinction, many within decades.
The scale of change to the natural environment is staggering; 75 percent of global land surface is significantly altered; 66 percent of oceans are experiencing cumulative deterioration; and over 85 percent of wetlands have been lost.
Figure 1: Species extinctions since 1500
WEF 2020 Global Risks Report
Almost three-quarters of the market capitalization of the FTSE 100 was found to be associated with production processes highly dependent on nature.2
This was recognized in the World Economic Forum’s 2020 Global Risks Report (GRR), which ranks biodiversity loss and ecosystem collapse as one of the top five risks in terms of likelihood and impact in the coming 10 years.
The impact and the risk are not specific to agriculture and food systems. Sectors across the entire economy are highly exposed to nature-related risks, primarily through their supply chains.
While the impacts and risks to primary industries that rely on the extraction of natural resources is clear, risks to secondary and tertiary industries are more complex.
Taking six industries as an example — chemicals and materials; aviation, travel and tourism; real estate; mining and metals; supply chain and transport; retail, consumer goods and lifestyle — over 50 percent of the gross added value (GVA) of their supply chains is highly or moderately dependent on, or has an impact on nature.3
Increased incidence of pandemics
Compounding this, COVID-19 demonstrates the staggering scale of nature-related systemic crises. A growing body of evidence suggests that the destruction of nature is increasing the incidence of pandemics related to zoonotic diseases.4
With economic damage set to surpass the 2008 global financial crisis, even small changes to tail-end risks will result in tremendous shifts in the value at risk across the financial system.
Managing risk caused by biodiversity loss
Finally, global policy on biodiversity is expected to tighten, with countries holding themselves accountable to targets and deploying incentives which expose corporations to transition risk.
The outcome of next year’s UN Convention on Biological Diversity (the biodiversity equivalent of the UNFCCC) will be instrumental in setting this ambition.
In parallel, engaged jurisdictions such as the EU are already moving ahead on biodiversity. As governments across the world integrate national targets into domestic policy, environmentally intensive assets may become stranded, risking insolvency.
The financial community has or is likely to have duties to understand and manage these impacts and risks, and disclosure may become mandatory in the future.
Laws and regulation governing environmental liabilities are constantly evolving. As data and technology enables transparency, governments and organizations will have stronger grounds to pursue claims.
The emerging Taskforce for Nature-related Finance Disclosures (TNFD) will create guidelines specific for the financial sector, building pressure on financial institutions to incorporate nature-related risks into internal risk management processes.
Those who act decisively now may not only reduce compliance costs in the future, but also stand to capitalize on new investor demands for environmental resilience.
Watch: Refinitiv Perspectives Live – ESG Investment, a cure all for Asset Management?
Biodiversity-related financial risks
In January 2020, Refinitiv spearheaded the formation of a new multi-member alliance through the launch of the Future of Sustainable Data Alliance (FoSDA) with the World Economic Forum in Davos.
This collaborative body of global influencers will focus on the fact that investors actually need to confidently invest more in sustainable economic activities. It will also aim to accurately inform and increase capital raising and allocation at the scale needed to tackle global societies’ environmental and social challenges.
The FoSDA webinar Biodiversity loss: Why your portfolio is already at risk introduced biodiversity or nature-related financial risks. Having brought together experts from the finance community, it covered (i) the current state of biodiversity; (ii) channels of nature-related risk; (iii) the future evolution of the policy landscape; and (iv) the emerging industry response.
The webinar also acted as the launchpad for a working group of FoSDA members to anticipate future challenges.
1. IPBES (2019): Summary for policymakers of the global assessment report on biodiversity and ecosystem services.
2. Natural Capital Finance Alliance (2018): Exploring Natural Capital Opportunities, Risks and Exposure: A practical guide for financial institutions
3. World Economic Forum (2020): Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy
4. Johnson, C. K. et al. (2020): Global shifts in mammalian population trends reveal key predictors of virus spillover risk’; Jones, K. E. et al. (2008): Global trends in emerging infectious diseases; Olivero, J. et al. (2017): Recent loss of closed forests is associated with Ebola virus disease outbreaks’