The availability and quality of data – in particular location-specific information – is an ongoing challenge for investors in the push to better address biodiversity.
Efforts to tackle this have primarily focused on terrestrial data. But investors and data providers are beginning to expand their quest for better biodiversity information to include oceans.
Arne Philipp Klug, MSCI’s biodiversity research director, says that while the main investor focus is still on terrestrial biodiversity data, he is increasingly receiving queries about ocean data.
These broadly cover data on company activities, and their impacts and dependencies, he explains. “Also, investors have been asking about deep-sea mining, given the concerns around potential negative impacts on sea life,” he tells RI.
Federated Hermes is among the investors attempting to engage companies on biodiversity loss in ocean ecosystems.
“It’s critical that companies address their impacts and dependencies on oceans, alongside land-based ecosystems,” Sonya Likhtman, associate director for engagement at EOS at Federated Hermes, tells RI. “Failing to do so could have severe repercussions for the climate, the food system and global economies.
“Companies may impact oceans at different stages of their value chains, for instance through producing high greenhouse gas emissions, contributing to over-fishing, or creating chemical runoff from agricultural production.”
However, data remains limited about overall ocean health and how companies address their ocean-related impacts. “This makes it challenging for investors to accurately assess the risks and incorporate them into decision-making,” says Likhtman.
There are a number of major challenges to finding good data and determining corporate impacts and dependencies on ocean biodiversity.
Lauren Lynch, manager of blue finance and oceans ESG at WWF, notes that while there are datasets on marine ecosystem health, these are often localised and the result of specific scientific studies of a particular region, species or ecosystem.
“As is the case with overall ocean ESG data, the challenge is in identifying what kinds of ocean data are available, the spatial and temporal resolution of the data and whether this allows for compatibility with other ocean data layers, and aggregating them in a way that makes the data easily accessible and actionable for an intended audience,” she says.
Joe Turner, senior principal specialist in data analytics at The Biodiversity Consultancy, points out that biodiversity data is hard enough to collect under any circumstances, “let alone when you can’t see most of it”.
“A lot of the real advances in terrestrial data have been driven by high-resolution satellite imagery to map habitats using land cover,” he says. “But with marine, satellites and other technologies is only really for shallow subtidal – so around 30 metres, if the water is clear – and intertidal areas.”
As an example of this type of technology, Turner points to Allen Coral Atlas, which uses remote sensing to map coral reefs, seagrass and other habitats in shallower waters.
“Biodiversity data as a whole is hard enough to collect, let alone when you can’t see most of it”
The Biodiversity Consultancy
Mapping deeper-water habitats is more challenging. “You would need specialist surveys, for example multibeam and side scan acoustics, supplemented by video or [underwater vehicle] imagery,” says Turner.
However, mapping the condition of the ecosystem using remotely sensed data is “incredibly difficult”, he adds.
Doug Gurr, director of the Natural History Museum in London, says his institution has done work on ocean biodiversity data. For example, it has explored the species in the Clarion-Clipperton Zone in the north-eastern Pacific Ocean, an area that is attracting interest for its deep-sea mining potential.
Gurr also flags early-stage work on ocean environmental DNA (e-DNA), a process where DNA is collected from water samples rather than from an individual organism, as well as rising interest in applying AI to detect species from low-cost passive acoustic sensors.
“It’s a work in progress, but hopefully we’ll be able to bring similar levels of precision to the marine environments that we have now regarding terrestrial,” he adds.
Corporate impacts and dependencies
Nevertheless, the ultimate goal for investors of linking corporate activities to ocean biodiversity and getting data on firms’ impacts and dependencies is unlikely to be within reach in the near term.
“It’s much easier with land because you can say a company operates in X area, With oceans – unless its drilling and mining – you can’t say they operate in a way that directly links their operations to the marine ecosystem of the ocean”
Nadia Humphreys, head of sustainable finance data solutions at Bloomberg LP, says: “We haven’t seen anything for oceans that maps the impact a company is specifically having in ocean ecosystems.
“It’s much easier with land because you can say a company operates in X area, but with oceans – unless its drilling and mining – you can’t say they operate in a way that directly links their operations to the marine ecosystem of the ocean. So, the indirect impact of companies and their operations in the ocean is much harder to measure.”
On a sector level, MSCI’s Klug suggests data could be easier to gather from oil companies with platforms in the ocean or aquaculture farms. “These firms don’t tend to disclose in detail their locations or the biodiversity data they may have, but we can utilise satellite images from various sources.”
He adds: “It’s more difficult regarding the shipping industry for example, as vessels do not operate in fixed areas, and it’s even harder regarding industries you’d consider more indirect in their link to oceans. For example, an agribusiness and how its fertilisers are getting into oceans and the nitrates are affecting marine biodiversity.”
Lynch notes that the many layers of ownership in the seafood industry pose another challenge, despite the fact that data platforms increasingly can track individual ships.
“The positive side to this is that many companies are waking up to the fact that most environmental and social risk exists at the asset level, and corporates are working hard to collect supply chain data so they can better understand these risks,” she says.
“Whereas a retailer asking its upstream suppliers for the names and identification numbers of its fishing vessels or locations of aquaculture farms may have been a tall order 10-20 years ago, this is now becoming more commonplace, and quickly becoming an expectation among suppliers.”
Risks and policies
Given the difficulty in assessing a company’s impact on oceans in detail, Klug says MSCI focuses more on what a company has in place in terms of risk management – for example, whether a shipping company has a policy on toxic pollution management.
For German manager DWS, there is a similar issue when getting data directly for firms, explains Paul Buchwitz, manager of the firm’s Concept ESG Blue Economy fund.
One critical issue for shipping or maritime tourism firms is the inadvertent introduction of invasive species to ecosystems, either through ballast water or marine life attached to ship hulls.
To tackle this, DWS sends out sector-specific questionnaires to companies. For instance, marine tourism companies and shipping are requested to provide information on ballast water treatment and hull biofouling measures, as well as policies or standards “which aim to reduce the incidence of invasive species introductions and protect biodiversity”, says Buchwitz.
Yet while companies do provide data, they are unable to provide exact information on ecosystem impact, such as whether there are species in ballast water which affect ecosystems, he adds.
He notes, however, that the existence of a policy – such as one on the use of a ballast water treatment system – can help DWS evaluate a company’s potential impact on ecosystems.
Drawing on existing solutions
WWF is working to help companies and financial institutions implement the TNFD recommendations in their marine operations and financing portfolios.
“With the release of the draft TNFD sector guidance on aquaculture and forthcoming draft fishing sector guidance, there are a growing number of resources available to help companies and financial institutions start implementing the TNFD LEAP [Locate, Evaluate, Assess, and Prepare] approach, to better understand nature-related risks and dependencies in the ocean context,” says Lynch.
TNFD’s technical director, Emily McKenzie, tells RI that the initiative is establishing a measurement and data working group, which will “focus on guidance to improve measurement of nature-related issues in the ocean realm, to support application of the TNFD’s recommendations”.
Lynch also highlights the work of the Making Oceans Count (MOC) initiative, which seeks to ensure that “material marine ecosystem-related risks and opportunities are better accounted for by key actors within the Nordic financial sector”.
As part of its work, the initiative published a paper in 2023 investigating opportunities and solutions to further integrate ocean-related data and metrics in financial decision-making.
Another notable development is that The Biodiversity Consultancy has been working to expand the Species Threat Abatement and Restoration (STAR) metric to cover marine ecosystems.
The metric, which is currently terrestrial-focused, uses the IUCN Red List of Threatened Species data to estimate the potential reduction in species extinction risk that could be achieved at a site, across a corporate footprint, or within a country.
Turner explains that the team took the original paper and worked with the authors, as well as IUCN.
“We aligned the methodology as much as possible, although we had to use some different data sources here and there but have made sure organisations could use the terrestrial and marine versions in tandem.”
He notes that, while there are some limitations, the aim was to use what is already available and provide a marine component “to a well-established metric that financial institutions and corporates have got used to so they can at least start to consider marine ecosystems in their assessments more easily”.
“Biodiversity is too complex to be solved with one metric, but we believe that the STAR metric offers a lot of benefits and can be used alongside others to get a fuller picture of the state of nature in a location.”