Ninety One, a global investment manager with $162bn assets under management, has launched a Sovereign Biodiversity Index, which provides a quantitative way for investors to assess nature and biodiversity risks at the national level.  

Peter Eerdmans, Co-Portfolio Manager, EM Sustainable Blended Debt, said: “As sovereign debt investors, we therefore need a practical way to assess how governments impact nature and the risks stemming from biodiversity loss, as they can significantly influence economic performance and consequently a nation’s ability to service its debt.” 

“This is particularly key for investors in emerging markets, where economies often rely heavily on nature, partly because of the relative importance of the agricultural sector.” 

By assessing how governments are impacting nature and biodiversity, sovereign investors can also seek to direct capital to issuers that are doing the most to safeguard biodiversity by preserving natural capital.

The Ninety One Sovereign Biodiversity Index incorporates a variety high-quality data sources – nature and biodiversity is a field in which data is relatively widely available and comprehensive indices already exist. For instance, Yale’s Ecosystem Vitality index (part of Yale’s Environmental Performance Index) offers useful insights and good coverage. 

Ninety One incorporates this into the index, building on it to include: more data, such as the Biodiversity Intactness Index, developed by the Natural History Museum; a policy pillar, which includes progress made on relevant Sustainable Development Goals (SDGs) and environmentally aligned taxes; and a greater focus on 5-year and 10-year trends for some of the key indicators, as this provides a clearer view of near-term trends, rather than metrics based on perhaps decades of environmental change.

In summary, the index comprises three pillars: Quality of Nature; Deforestation; and Policy.

It does not currently include a pillar on ‘risks from biodiversity loss’, given the lack of suitable data.

Compiling the data together, across the three pillars, provides an overall score for each country. 

This can be used to rank countries, although zooming in on the details and analysing the scores of each of the subcomponents is often the most useful. The top and bottom 10 sovereign debt issuers ranked by Ninety One’s Sovereign Biodiversity Index are shown below.

“Seven of the top 10 are European countries. This reflects stable and even improving trends in biodiversity intactness in some countries, which is counter to the global trend. Rewilding efforts and improved legal protections across the European Union have been relatively successful, as highlighted in a report co-authored by ZSL and BirdLife International in 2022,” Eerdmans said.

The Ninety One Sovereign Biodiversity Index is the third quantitative tool introduced by Ninety One to underpin its forward-looking Environmental scores for emerging countries – part of its proprietary ESG assessment framework.

It follows the 2020 launch of the Climate and Nature Sovereign Index – which assesses the long-term risks relating to climate change and nature loss at a country level – and the 2021 launch of the Net Zero Sovereign Index, which assesses countries’ progress towards net zero, within the context of a just transition.

Eerdmans said that it is not easy to give one generic comment on African countries.

"We have countries like Zambia, Gabon and Botswana that score in the top 20 countries (out of 116). These countries have seen very little deforestation, have high % protected areas (all over 25%) and score well on the Biodiversity Intactness Indicator for instance, with reporting virtual no loss or even some slight improvements. On the other end of the spectrum, Egypt, Tunisia and Mozambique are examples of countries that score in the bottom 20," he told Africa Global Funds.

"In general for these countries, we see poor levels of protection, significant increases in threatened species as per the Red List, and poor Ocean Health (Tunisia) or negative deforestation trends (Mozambique),” he added.