SUSTAINABLE BY NATURE
SEQUEL: OUR PORTFOLIO
BIODIVERSITY FOOTPRINT
Marketing Communication for Professional Investors - June 2022

The sustainable
investor for achanging world

S U STA I N A B L E B Y N AT U R E S E Q U E L : O U R P O R T F O L I O B I O D I V E R S I T Y F O OT P R I N T-2-CONTENTSINTRODUCTION

3WHAT IS BIODIVERSITY FOOTPRINTING?

4

POTENTIAL BIODIVERSITY IMPACT OF OUR CORPORATE INVESTMENTS

7

1. Coverage and data quality levels

7

2. Biodiversity measures

9

SELECTED PORTFOLIO BIODIVERSITY FOOTPRINT

15SO WHAT? LOOKING AHEAD

16

S U STA I N A B L E B Y N AT U R E S E Q U E L : O U R P O R T F O L I O B I O D I V E R S I T Y F O OT P R I N T-3-

INTRODUCTION
In early 2022, scientists announced that the earth crossed six1 of the nine planetary boundaries
demarcating the safe operating space for humanity: Pollution from ‘novel entities’2, freshwater,
climate change, biosphere integrity, biogeochemical cycles and land-system change. This unravellingof nature, now underway, poses an existential threat to humanity.
Figure 1: The nine planetary boundaries

Source: Stockholm Resilience Centre

As an asset manager with a broad range of clients who all depend upon a stable biosphere, we havea dual set of responsibilities:••

To understand how our investments impact nature – our role in driving this crisis
How nature loss may translate into financial risks.

Just over a year ago, we published our biodiversity roadmap: “Sustainable by nature”, detailing ourviews on the nature and urgency of this crisis and how we are actively responding to it. We used
a variety of tools to understand our own dependencies and impacts on nature. In particular, weanalysed our global assets under management (AUM) to understand our exposure to water anddeforestation risks.

1. Freshwater boundary exceeds safe limits – Stockholm Resilience Centre
2. Outside the Safe Operating Space of the Planetary Boundary for Novel Entities | Environmental Science &Technology (acs.org)

S U STA I N A B L E B Y N AT U R E S E Q U E L : O U R P O R T F O L I O B I O D I V E R S I T Y F O OT P R I N T-4-One of the many consequences of water overconsumption, and more importantly, deforestation
and unsustainable land management, is biodiversity loss. Biodiversity loss may affect societies,
economies and ultimately investors, which is why we decided to complement our work on ourwater and deforestation footprints with additional data to capture a more complete picture of our
exposure to, and impact on, global biodiversity loss.
There is a pressing need for both raw data from companies and the tools to help integrate this data
into our investment decisions. The markets also require a consistent framework for understanding
and reporting the full range of risks posed by biodiversity loss. Therefore, in March 2020, working
with AXA Investment Managers, Sycomore Asset Management and Mirova, an affiliate of Natixis
Investment Managers, we embarked on a competitive global search for a research firm that could
provide a tool enabling investors to measure how their investments impact biodiversity.
We selected Iceberg Data Lab and I Care & Consult at the end of a structured tender process initiatedby a public Call for Expression of Interest (CEI) and guided by a set of principles for the developmentof research tools. We are grateful for the support from nature-related experts at Global Canopy,
WWF, ZSL, CDC Biodiversité, UNEP-WCMC and Capitals Coalition, to name only a few key partners
that provided input to the initiative.
This paper presents initial findings from our efforts to use Iceberg Data Lab’s research to determine
a biodiversity footprint for our corporate holdings. This first phase of our analysis focuses solely on
our negative impacts, without addressing our dependencies or the financial risks we face from nature
loss, noting that we provided an initial assessment of our dependencies on ecosystem services inour biodiversity roadmap published last year.
The objective of this paper is to test biodiversity footprinting on the corporate holdings in our
global portfolios in order to understand what it looks like, what it can be used for, and to identify
the principal improvements that need to be made to the tool.

WHAT IS BIODIVERSITY FOOTPRINTING?
Biodiversity footprinting is an assessment tool that helps investors combine investees’ modelled
and reported data to quantify their potential biodiversity impact, without the need to measure
actual biodiversity change on the ground, an impossible task for a large, globally diversified asset
manager. As such, the footprint is a measure of negative impact – what are the potential impacts
on nature represented by the companies in our portfolios? It does not, however, measure howdependent they are on nature, nor does it quantify the risks that arise from biodiversity loss.
The Iceberg Data Lab and I Care & Consult Corporate Biodiversity Footprint uses environmental
input-output modelling and life cycle assessment data to quantify environmental pressures along
the entire supply chain of a given company, using asset-level data where available. The GLOBIO3
model is then used to link quantified environmental pressures to biodiversity loss (expressed in
km2MSA, see box).
The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) has
identified five direct drivers of (or pressures on) nature loss. The Corporate Biodiversity Footprint
methodology currently covers the following pressures:••••Land use change (land occupation, transformation, encroachment and fragmentation)
Air pollution through nitrogen and sulphur deposition
Water pollution (eutrophication, acidification, ecotoxicity, plastic entanglement)
Climate change.

Each environmental pressure is then translated into a quantified impact on biodiversity andaggregated to compute the Corporate Biodiversity Footprint of a given company, expressed in
km2MSA.

S U STA I N A B L E B Y N AT U R E S E Q U E L : O U R P O R T F O L I O B I O D I V E R S I T Y F O OT P R I N T-5-In summary, the quantified impact on biodiversity of a given company depends on three variables: The
pressure to ecosystems (such as water pollution and land transformation, disclosed or modelled),
the modelled severity of the disturbance induced and the affected surface area.
Figure 2: Iceberg Data Lab issuer-level biodiversity footprint calculation

Companies
reports, publicly
available
information

Financials
providers

Input by IDL
research analyst
team
Enrichment by
IDL researchanalyst teamwith reported
operational
data

Enrichment by
IDL researchanalyst teamwith reported
environmental
data

Conclusion:
positioning of
the constituent
in the universe
and versus
peers

Revenue persector (NACE)

Automated

Modelled input
and output per
sector

IDL proprietarymodel

Quantified
Environmental
Pressures
CHANGE OF
LAND USE

CLIMATECHANGEAIRPOLLUTIONWATERPOLLUTION

Environmental
reportings

Quantified
impacts on
Biodiversity
MSA CLIMATE CHANGE
MSA LAND USE
MSA NITROGEN DEPOSITIONMSA TOXIC COMPOUND

Source: Iceberg Data Lab

Our assessment uses Iceberg Data Lab and I Care & Consult Corporate Biodiversity Footprint data
V2.9 and relates to our assets under management (AUM) as of 31 December 2021. Corporate
data covers the latest year available, primarily FY 2020.

S U STA I N A B L E B Y N AT U R E S E Q U E L : O U R P O R T F O L I O B I O D I V E R S I T Y F O OT P R I N T-6-Going from MSA to km2MSA – What does it mean and what does it tell us?
MSA (Mean Species Abundance) is one of the reference metrics used by the Convention on
Biological Diversity (CBD) and the Intergovernmental Science-Policy Platform on Biodiversity
and Ecosystem Services (IPBES). It measures the average relative abundance of native species ina delimited space compared to their original abundance in undisturbed ecosystems.
MSA therefore captures the conservation status of an ecosystem in relation to its original state,undisturbed by human activities3 and pressures. For instance, an area with an MSA of 0% will havecompletely lost its original biodiversity (or will be entirely colonised by invasive species) whereas
an MSA of 100% indicates a level of biodiversity equivalent to a pristine, undisturbed ecosystem.
An undisturbed desert or rainforest each has an MSA of 100%, despite significant differences in
the naturally occurring abundance of species in these two very different ecosystems.
Linking environmental pressures to potential biodiversity impact, expressed by a change in MSA,
is not simple, as it includes spatial and temporal dimensions: Over which area was the mean
species abundance affected and for how long was it disturbed by the activities of a company
within a given year?
The unit used in the Corporate Biodiversity Footprint is expressed in km2MSA, although in practice,
this simple metric substitutes for a complex multi-factor model. The metric seeks to measure
the potential negative change in MSA due to a company’s operational and value chain impacts
by translating total degradation of nature into square kilometres. The metric is a single unit ofmeasurement used to understand the total potential negative impact of a company in spatial
terms. If we could combine all of a company’s negative impacts to nature, and express that interms of square kilometres, how much ‘artificialised’ or ‘denatured’ land would that represent?
For example, a footprint of -100 km2 MSA means that all the original biodiversity is lost overan area of 100 km2 for one year. In practice, a lower proportion of biodiversity may be lost overa larger area, for example 10% over an area of 1 000 km2 for one year, or 10% over an area of
100 km2 for 10 years. For a responsible company with relatively low impacts, 100 km2 may bea small fraction of the total land area associated with its value chain. This metric should not
be interpreted as a precise representation of damage on the ground, but rather an indication ofpotential damage, based on a wide range of assumptions and models, to enable us to visualize
total potential impact and compare one company to another.
And although it must be understood that all biodiversity is local, a variety of global events thatcannot be localised – in particular, greenhouse gas (GHG) emissions – are having very significant
impacts on local ecosystems. Currently, as well, corporate transparency relative to nature loss
is poor – we do not have all of the data we need to accurately represent how specific operations
affect a particular piece of land, or biome. We must thus use averages while recognising thatprecision is lost when we do so. While MSA is intended to measure a specific ecosystem, global
averages represent something very different – for example, an average MSA between theAmerican Midwest and the Amazon rainforest is not particularly meaningful.
The data that is available, however, can still help us to begin a journey towards a verifiably
accurate footprint. For example, where companies disclose the source of their soft commodities,
such as palm oil or soy, Iceberg Data Lab can use FAO4 data to understand in-country conditions
and yields to estimate the surface area covered. They can also plug in modelled data on pesticideuse, when that information is not disclosed by the company. If a company discloses that X% of
its paper sourcing is FSC5 certified, then that can be taken into account. Each slight adjustment
brings the picture into sharper focus. We can also use these data gaps to inform our data requests
to corporations, which, in turn, encourages companies to set up systems to track and better
manage their impacts on local ecosystems.
3. By ‘human activities’ we are primarily referring to the impacts created by large industrialised societies.
We recognise that indigenous peoples around the world have served as effective stewards of nature andcontinue to do so.
4. United Nations Food & Agriculture Organization
5. Forest Stewardship Council

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POTENTIAL BIODIVERSITY IMPACT OF OUR CORPORATE INVESTMENTS
For this analysis, we focused on two asset classes of our corporate investments – equities and fixedincome6 securities we hold in publicly-traded companies, which we refer to as Corporate AUM. This
analysis does not include asset classes such as sovereign debt, municipal bonds, private debt orreal assets.
To report on the potential biodiversity impact of our Corporate AUM, we use the following
overarching key performance indicators:
1. Coverage and Data Quality Measures
A. Coverage levels
B. Data quality levels
2. Biodiversity Measures
A. Absolute biodiversity footprint of the companies in which we invest (without taking into
account our ownership share)
B. Absolute biodiversity footprint of our Corporate AUM (taking into account our ownership7)
C. Financed biodiversity footprint of our Corporate AUM per million EUR invested
D. Biodiversity intensity of our Corporate AUM (per unit of capital employed)
Results refer to our full Corporate AUM. We also give an example of three funds and plan to scale
up this type of analysis in the future.

1. Coverage and data quality levels
A. Coverage levels
Satisfactory. We were able to retrieve Corporate Biodiversity Footprint (CBF) data for 1 800+
corporate issuers in our equities and fixed-income portfolios, representing 70% of our Corporate
AUM. Given the novelty of biodiversity footprinting, we consider this coverage satisfactory, but wewill aim to improve it over time.
B. Data quality levels
Average. Iceberg Data Lab (IDL) calculates a data quality score for each issuer, with the score ranging
from 1 (best) to 4 (worst). IDL is seeking useable quantitative data across each company’s entire
value chain.
•

The average data quality score of the issuers in our portfolios is 2.7, with variations at the sector
level. This means that CBF modelling is mostly based on the revenue and sector exposure ofissuers rather than consumption and production data, let alone reported quantitative data on
environmental pressures.

•

Scope 1 and 2, GHG emissions are, unsurprisingly, the biodiversity pressure on which issuers
report useable quantitative data. Environmental pressures for 24% of total Corporate AUM weremodelled using production and consumption data (overall data quality level equal to or lower
than 2), with the remainder modelled using revenue and sector exposure.
“Scope 1” refers to the direct pressures generated by a company, for GHG emissions they comefrom the combustion of fossil fuels, or chemical reactions, for Land Use they are linked to surface
artificialised or occupied directly by the company. “Scope 2” refers to the pressures of a company
induced by its electricity, heat, and cooling purchase. “Scope 3” refers to all indirect pressures
induced by the activity of a company.

6. Including Asset-Backed Securities
7. Using Enterprise Value as for Carbon Footprinting to allocate between corporate bonds and listed equity

S U STA I N A B L E B Y N AT U R E S E Q U E L : O U R P O R T F O L I O B I O D I V E R S I T Y F O OT P R I N T-8-Figure 3: AUM coverage and data quality levels (DQL)

DQL between 1 and 2

24%
AUM not covered

30%

AUM
covered70%

DQL between 2 and 3

46%

Data quality level indicator
With each data point, a Data Quality Level indicator (DQL) is calculated. This shows thesources used for the calculation and the transparency level of the analysed corporate orasset, so the indicator reflects the degree of uncertainty of the final result.
Four levels of input data quality are available:•

DQL of 1: Environmental pressure data, such as hectares of land occupied or tonnes of
GHGs emitted in a specific year, are considered best when reported by companies•

DQL of 2: If no environmental data is reported, consumption and production data for
specific products, such as specific agricultural commodities, plastics or fuels, is used tomodel environmental pressures•

DQL of 3: If only sales are reported, the volumes are modelled using a customised Input/
Output model•

DQL of 4: When no data is available, a biodiversity footprint is modelled from a sectoral
average of IDL’s dataset.

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2. Biodiversity measures
A. Absolute biodiversity footprint of the companies in which we invest (without taking into accountour ownership share)
We estimate that the total absolute biodiversity footprint of the companies in which we are invested(without taking into account our percentage ownership) is approximately -6 million km2MSA, whichmeans that the activities of these companies and their value chains potentially maintain a fully
degraded area equivalent in size to most of Europe, annually.
Formula used to calculate A:

With:
i: a corporate issuer in which BNPP AM invests that is covered by IDL
n: we were able to retrieve CBF data for 1,800+ corporate issuers
CBF Valuei: Corporate Biodiversity Footprint of corporate issuer i (source = IDL)
B. Absolute biodiversity footprint of our Corporate AUM (taking into account our ownership8)
When seeking to attribute this figure to our share of investments, using the Partnership for
Biodiversity Accounting Financials (PBAF)9 ‘follow the money’ principle and Enterprise Value10, we
find that our financed absolute biodiversity footprint is approximately -8 000 km2MSA, which meansthat our investments potentially maintain a fully degraded area equivalent to five times the size of
London, annually.
Formula used to calculate B:

With:
AUMi: amount invested by BNPP AM in corporate issuer i (source = BNPP AM)
Enterprise Valuei: Market Capitalization + Total debt for company i (source = Worldscope)
C. Financed biodiversity footprint of our Corporate AUM per million EUR invested
Our financed absolute biodiversity footprint is approximately -0.06 km2MSA per million EUR
invested, which means that for each million EUR invested in our funds, six fully degraded hectares
are potentially maintained each year.
These figures should be understood as orders of magnitude rather than taken at face value, andrepresent the best of our knowledge and modelling capabilities at the time of writing. They areprone to multiple-counting (estimated at over 70% by IDL), although this may vary depending on
sector allocation and the specific stocks we invest in.

8. Using Enterprise Value as for Carbon Footprinting to allocate between corporate bonds and listed equity
9. The Standard | PBAF – Partnership for Biodiversity Accounting Financials (pbafglobal.com)
10. We use the following definition: Enterprise Value = Market Capitalization + Total debt.

S U STA I N A B L E B Y N AT U R E S E Q U E L : O U R P O R T F O L I O B I O D I V E R S I T Y F O OT P R I N T-10-Formula used to calculate C:

D. Biodiversity intensity of our Corporate AUM (per unit of capital employed)
The average biodiversity intensity of the companies in which we invest: We define biodiversity
intensity as the mean species abundance loss, in km2MSA, per unit of capital employed. Capital
employed, rather than revenue or net sales, was used following the recommendations of IDL tocompare companies throughout our universe from an investment intensity standpoint.
Formula used to calculate D:

With:
Capital Employedi: capital employed for company i (source = IDL)•

Interestingly, our Corporate AUM’s biodiversity intensity (weighted by AUM) is about two-thirdsof the unweighted biodiversity intensity of the issuers in our investment universe. It is also
approximately 15% lower than that of the MSCI ACWI.

This shows that we are relatively less invested in issuers with higher biodiversity impact.
•

Our Corporate AUM’s direct11 biodiversity intensity is approximately -0.01 km2MSA per million
EUR of capital employed (weighted by AUM). When including value chain impacts, this figure
rises to -0.15 km2MSA per million EUR of capital employed.

This highlights one of the main biodiversity challenges for investors: Impacts are predominantly
situated within value chains, but issuers do not provide the information and traceability required forinvestors to properly manage these impacts.
•

Land use change is the main environmental pressure, contributing approximately 80% of theweighted biodiversity intensity of our Corporate AUM, followed by water pollution (10%), climatechange (8%) and air pollution (3%). This is roughly in line with IPBES results at a global level, but
excludes key pressures such as resource overexploitation and invasive species.

11. “Direct” refers to Scope 1, or operational impacts.

S U STA I N A B L E B Y N AT U R E S E Q U E L : O U R P O R T F O L I O B I O D I V E R S I T Y F O OT P R I N T-11-Figure 5: Relative contribution12 of each value chain scope, sector and pressure to our weighted
biodiversity intensity
ScopesSectors

Pressures

34%

16%

68%

15%
78%
15%
12%

1%

3%
1%

5%

1%

10%

1%
0%
27%

8%

0%
3%

Source: Made with SankeyMATIC based on BNPP AM analysis•

The consumer staples, consumer discretionary, industrials and materials sectors are the principal
contributors to our Corporate AUM weighted biodiversity intensity, which is mainly due to thebiodiversity intensity of their Scope 3 impacts. Our Corporate AUM’s primary contributions tonature loss are through the impacts of land use change, followed by water pollution, greenhousegas emissions and air pollution.

The aggregated biodiversity footprint hides large sectoral disparities.
Figure 6 displays the biodiversity intensity of our aggregate corporate equity and fixed-income
investments, where the size of the box represents the relative portion of our AUM. The color
represents the relative biodiversity intensity by Global Industry Classification Standard (GICS)
sectors. Darker red signifies higher intensity.

12. The sum of contributions by scope (sum = 101%), sectors (sum = 98%) and pressures (sum = 99%), differsfrom 100% due to rounding effects.

S U STA I N A B L E B Y N AT U R E S E Q U E L : O U R P O R T F O L I O B I O D I V E R S I T Y F O OT P R I N T-12-Figure 6: Relative biodiversity intensity (per capital employed) by GICS sector, weighted by AUM
Low, 65%

High, 30%

Information Technology

Health Care
Industrials
Real Estate

Financials

Communication
Services

Consumer
Discretionary

Materials

Very high, 5%Utilities

EnergyConsumer Staples

Low = below -0.20 km²MSA per million EUR capital employedHigh = between -0.20 and -0.50 km²MSA per million EUR capital employed
Very High = above -0.50 km²MSA per million EUR capital employed
Based on our analysis, when looking at the chart, we note some key takeaways:•

More than 65% of our Corporate AUM is invested in sectors with a low biodiversity intensity.
This is mostly due to our high exposure to the financials sector, which has a relatively low
biodiversity intensity (per million EUR capital employed), even when taking into account financed
biodiversity impact. Interestingly, when looking at our biodiversity intensity per million EUR
sales, the financials sector has one of the highest biodiversity intensities, which illustrates theimportance of choosing the right intensity metric.

•

Consumer staples has the highest biodiversity intensity (per million EUR capital employed) –mostly due to land use change – and represents over 5% of our AUM, followed by the materials,
industrials and consumer discretionary sectors. Surprisingly, the energy and utilities sectors
have relatively low biodiversity intensity – although with large variations among issuers – mostly
attributable to the energy mix and associated emissions of GHGs and other air pollutants. Figure
7 below highlights the most material biodiversity impacts for selected sectors.

•

We find that in most sectors, our average biodiversity intensity (weighted per AUM, see formulaD) is lower than the sector-level average (unweighted), suggesting that within most sectors, weare more invested in companies that have a lower biodiversity intensity13. This is particularly
true for the consumer discretionary sector, where our (weighted) average biodiversity intensity is
about half the sector average. On the other hand, our (weighted) average biodiversity intensity ishigher than the sector average for the energy, industrials and utilities sectors.

While today no measure of biodiversity impacts can be considered comprehensive, we believe IDL’s
assessment has captured many of the most material impacts on biodiversity at the sector level(Figure 7).

13. For intra-sector comparison and engagement, it may be necessary to analyse the data at a more granularlevel and compare sector intensity/company-level intensity based on their biodiversity intensity per unit ofproduction rather than revenue.

S U STA I N A B L E B Y N AT U R E S E Q U E L : O U R P O R T F O L I O B I O D I V E R S I T Y F O OT P R I N T-13-Figure 7: Selected sectors: Biodiversity impact deep-dive
The most material impact of the Food sector.

LAND USE CHANGE•••

To grow agricultural raw materials, large
areas of land are needed which results ina high impact on biodiversity.
- The most material commodities areproducts of meat. Indeed, the impact
on land use, linked to the cultivation of
the raw materials used to feed them,is very high.
Intensive monoculture has a high impact
on soil erosion and degradation of species
richness or abundance.
Moreover, highly intensive production
systems that rely on irrigation, drainage
and soil levelling practices degrade
natural ecosystems.

AIR POLLUTION•FRESHWATER ECOTOXICITY•

Conventional agriculture, which uses
high levels of fertilizers and pesticide
applications, has a negative impact onsoil fertility and species diversity.

Sulphur dioxide and nitrogen oxides
emissions coming from fertilizers
participate in the acidification andeutrophication of soils which have an
important effect on the degradation ofvegetation and the appearance of invasive
species that inhibit the others.

GHG EMISSIONS••

Livestock farming, and especially beeffarming, is a major emitter of GHG
emissions. This is due to the production,and often the importation, of raw
materials to produce their food (soy,corn, etc.). Livestock farming also emits
greenhouse gases like methane, whichhave a very important impact on global
warming.
Agricultural products resulting fromdeforestation (beef, soy, cocoa, etc.) arealso high emitters of greenhouse gases
and have a dramatic effect on the climate.

S U STA I N A B L E B Y N AT U R E S E Q U E L : O U R P O R T F O L I O B I O D I V E R S I T Y F O OT P R I N T-14-The most material impacts of the oil and gas sector.

GHG EMISSIONSLAND USE AND LOCAL IMPACT

The most material impact arises from thefinal use and combustion of natural gas andpetroleum products. Extraction, processing
and transport also require energy input.
Methane emissions through flaring andfugitive emissions contribute to the high GHG
emissions of the sector.

For the extraction of crude oil and naturalgas, tools like wells are needed to access thefuels from the surface. In case of oil sands,a large land surface is needed to accessthe oil. Refineries, storage, transportation,
distribution and infrastructure also requireland to be artificialized and fragmented.

AIR POLLUTION

WATER AND SOIL POLLUTION

Through the combustion of fossil fuels, highlevels of air pollutants like NOx and SOx are
released which leads to acidification.

Crude oil contains many pollutants which
are hazardous to water. In case of oil spills,
hazardous substances can bioaccumulate
in living organisms or pollute the water for
decades.

Source: Iceberg Data Lab

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SELECTED PORTFOLIO BIODIVERSITY FOOTPRINT
Figure 8 shows results and coverage levels for one equity portfolio, one fixed-income portfolio andone thematic portfolio. We plan to scale up this assessment in the future.
Figure 8: Selected fund-specific results*

Portfolio

Benchmark

CBF
Coverage

Biodiversity footprint
per million euro invested(km2MSA, rebased at 100%coverage)

CBF
Coverage

Biodiversity footprint
per million euro invested(km2MSA, rebased at 100%coverage)

Fund Difference
vs Benchmark (%)

BNP Paribas Funds
Sustainable Euro
Corporate Bond Group

61%

-0.05

Bloomberg Barclays
Euro Aggregate
Corporate Index

58%

-0.06

-14%

BNP Paribas Actions
Monde ISR

87%

-0.07

MSCI ACWI

88%

-0.06

+28%

BNP Paribas
Funds Ecosystem
Restoration

20%

-0.02

MSCI ACWI

88%

-0.06

-63%

The investments in the funds are subject to market fluctuations and the risks inherent in investments in securities. The value ofinvestments and the income they generate may go down as well as up and it is possible that investors will not recover their initialoutlay, the funds described being at risk of capital loss.
For a Complete description and definition of risks, please consult the last available prospectus and KIID of the funds . Investors
considering subscribing to a fund should read carefully its most recent prospectus and KIID that can be downloaded free of charge fromour site.

Of the three portfolios assessed, BNP Paribas Funds Ecosystem Restoration has a lower biodiversity
footprint than its benchmark. Ecosystem Restoration is a thematic fund, with the objective of helping
to restore our oceans, lands and urban communities by investing in companies that are engaged in
improving aquatic, terrestrial and urban ecosystems, through their products, services or processes.
Yet, the results are not due to the positive focus of the fund. IDL’s methodology only takes
into account negative impacts, with the positive impact measurement not yet captured in themethodology (planned for the end of 2022).
The results show that companies comprising part of this portfolio are likely to have a lower potential
negative impact through their operations and value chains than others, on average, in any sector. In
performing attribution analysis, we find that the difference is mainly due to stock selection rather
than sector allocation. Results are very uncertain given the low coverage level.
While we find that comparing funds with their benchmarks to be an interesting exercise, theresults bear further investigation and the model needs further refinement for us to draw morerobust conclusions.

S U STA I N A B L E B Y N AT U R E S E Q U E L : O U R P O R T F O L I O B I O D I V E R S I T Y F O OT P R I N T-16-SO WHAT? LOOKING AHEAD
This first biodiversity footprint assessment enables us to establish a baseline against which we
can monitor our future performance. It also provides a high-level compass to identify where closer
analysis of individual issuers is warranted. This complements the suite of tools and analysis our
ESG analysts perform at the sector and issuer level, and helps to identify key targets for direct
engagement by our stewardship team and portfolio managers.
We are optimistic about the usefulness of this analysis, but do wish to highlight that many challenges
remain ahead. Biodiversity in or beneath the soil, novel entities, marine biodiversity, extinction risk
and species richness dimensions have not yet been fully captured, and some pressures, such as
invasive species and resource overconsumption, have yet to be modelled. This is not to say thatscientists do not have good data on these aspects of the problem, but there is still a lack of data thatis usable by investors, linking specific impacts to individual companies. This is a significant blind
spot, as we understand that companies are directly connected to each of these additional pressures.

USE CASES

KEY ATTENTION POINTS• The calculation of our biodiversity footprint
allows us to quantify our potential impacts on
biodiversity and better understand the most
likely impactful sectors and pressures.

• Biodiversity footprinting captures potential impact
on biodiversity rather than actual impact on the
ground, as it relies on models such as GLOBIO.
For high-impact companies and activities, it istherefore necessary to complement this metricwith actual, measured data.

• The methodology goes further than sectorbased materiality assessments as it integrates
company-specific data, where available, andweights pressures based on the potential severity
and scale of their impact on biodiversity to
produce a single metric, km2MSA.
• Because business measurement and reportingon biodiversity are extremely limited, sharing
our experience of calculating our biodiversity
footprint contributes to critical knowledge,
while bringing innovation and transparency toscientifically robust and consistent measurementof biodiversity impact.
• Our biodiversity footprint analysis is compatible
with the TNFD14 beta framework. As the LEAP15
approach for financial institutions (LEAP-FI) is
being designed, we intend to share our analysis
with our peers, as well as continuing to exchange
views with CBF Steering Committee members,
especially our close partners AXA IM, Mirova andSycomore.
• The calculation of our biodiversity footprint allows
us to respond to the requirements of Article 29 of
the French Law on Energy and Climate regarding
biodiversity measurement and reporting.

• Not all drivers of biodiversity loss are includedin this version of our biodiversity footprint
calculation, which may change the order ofpreference between sectors and companies. The
CBF methodology of IDL is evolving to include
additional key biodiversity pressures, such as
invasive species, water consumption and resource
overexploitation.
• The calculation of our biodiversity footprint is
not responsive to the local characteristics of
ecosystems as IDL’s CBF methodology does notdistinguish between pristine ecosystems withhigher and lower biodiversity abundance levels(e.g., undisturbed desert or rainforest). Thismeans that the potential impact calculated must
be interpreted with care and complemented
with other metrics that capture the biodiversity
importance of specific locations.
• Environmental pressures are usually calculated
based on environmental input-output modelling
and life cycle assessment. Where averages areused, the results may not distinguish between
companies within the same sector. Biodiversity
footprinting may therefore be complemented withother metrics to support intra-sectoral ranking.

14. Taskforce on Nature-related Financial Disclosures
15. Locate, Evaluate, Assess, Prepare. https://framework.tnfd.global/the-leap-nature-risk-assessment-process/S U STA I N A B L E B Y N AT U R E S E Q U E L : O U R P O R T F O L I O B I O D I V E R S I T Y F O OT P R I N T-17-As we consistently affirm, collaboration is a must on this data journey. We are playing our role asactive stakeholders in many biodiversity initiatives and partnerships, such as Capitals Coalition,
TNFD, PBAF, ALIGN, WWF Biodiversity Risk Project, Aligned Accountability, and CDP Biodiversity, as
well as in co-establishing the forthcoming Nature Action 100.
As we move ahead, we continue to encourage our most biodiversity-impactful investees to disclose
useable quantitative data on biodiversity pressures, such as tonnes of GHGs emitted or hectares ofland converted. This has significant synergies with our other work on environmental footprinting
as established in our Global Sustainability Strategy, in particular our Carbon, Water and Forest
footprinting efforts.
We further encourage data providers to attempt to align their biodiversity measurements with therecommendations of the PBAF and ALIGN frameworks. Particular attention should be paid to spatial
precision and accuracy, responsiveness to a company’s mitigation and feasibility to apply at scale.
We also invite data providers to develop methodologies for measuring positive impact, which is an
integral part of assessing overall impact on biodiversity.
We plan to investigate the links between issuer-level biodiversity footprint and the other indicators
we use to steer our investments, such as the ‘E’ components of our ESG scores. This would allow
us to identify complementarities and advance the convergence of tools we employ internally. Our
proprietary ESG scoring framework is instrumental to our ability to generate long-term sustainable
investment returns for clients, while having a positive impact on the environment, the economy andsociety.
Finally, we will persevere in our efforts to reduce the negative impact of our investments on
biodiversity, in particular on land use change – for example through our no-net-deforestationcommitment.

SFDR and Article 29 of French Law on Energy and Climate
The REGULATION (EU) 2019/2088 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
of 27 November 2019 on sustainability-related disclosures in the financial services sector
requires financial market participants to consider the principal adverse impacts of investment
decisions on sustainability factors. In particular, adverse sustainability indicator number 7
relates to the share of investments in investee companies with sites/operations located inor near biodiversity-sensitive areas, where activities of these investee companies negatively
affect those areas. We are currently assessing third-party data vendor (including IDL)
offerings related to this indicator.
This paper will also allow us to respond to French regulation requirements. Indeed, thenew decree under Article 29 of the French Law on Energy and Climate extended climate risk
reporting requirements to include biodiversity related risks. Accordingly, effective from June
2022, asset managers will be required to report on their alignment strategy with long-term
biodiversity targets.

S U STA I N A B L E B Y N AT U R E S E Q U E L : O U R P O R T F O L I O B I O D I V E R S I T Y F O OT P R I N T-18-

Case study: linking biodiversity footprinting and our work on deforestation
Last year, we published the first results of a deforestation assessment we performed across
our corporate investment universe, where we combined a range of sources (such as CDP
Forest, SPOTT and Forest 500) to assess the strength of no-deforestation commitments.
Deforestation is a key driver of land use change, contributing approximately 80% of our
Corporate AUM biodiversity footprint. We thus attempted to combine issuer-level land usechange biodiversity footprints with an assessment of the strength of their no-deforestationcommitments to identify issuers with potentially high impact and weak commitments.
While the sample size is relatively low (139 issuers), we find that on average, issuers withweak or no deforestation policy tend to have a higher land use change biodiversity intensity(Figure 9). Consequently, this type of assessment is useful in prioritising further research andengagement.

Figure 9: Links between the strength of issuers’ no-deforestation policy and land use change
biodiversity intensity

Strength of Deforestation policy

Coverage (number of issuers)

Average km2MSA / m EUR
capital employed(land use change)

Null

91

-0.72

Partial

38

-0.53

Full

10

-0.30

June 2022 - Design: AM Graphic Design - P2205026

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