ISS ESG, the sustainable investment arm of Institutional Shareholder Services Inc. (ISS), and Qontigo, a global provider of index, analytics and risk solutions, have announced the release of the ISS STOXX Biodiversity Index Suite to mark the UN’s International Day for Biological Diversity.
The new cobranded index suite helps interested clients align portfolios with their biodiversity impact reduction goals. All indices in the suite exclude companies involved in activities assessed to be causing significant harm to biodiversity or reducing the biodiversity footprint. They also enhance alignment with biodiversity-oriented UN Sustainable Development Goals (SDGs), such as life below water and life on land. At the same time, the index methodology targets an aggregate reduction in carbon intensity of at least 30 per cent across the included constituents.
In addition to the baseline family, the suite also includes a Biodiversity Leaders family which consists solely of companies deriving at least 20 percent of their revenues from activities that are deemed to make a positive net contribution to the SDGs. These activities include preservation of marine ecosystems and sustainable agriculture and forestry.
“Biodiversity is one of the paramount themes of our age and calls for investors to understand and address its associated risks in their investment portfolios,” says Axel Lomholt, Chief Product Officer for Indices & Benchmarks at STOXX. “This launch comes as global investors are urged by some to account for and price nature into their sustainable investment strategies, and we are confident that the unique combination of our high-quality STOXX index suite, together with ISS ESG’s rigorous data sets, will prove valuable in enabling investors to align with their biodiversity objectives.”
Each new index family uses a granular index construction methodology, built on ISS ESG’s extensive datasets and a three-part framework to select index constituents based upon an avoid, minimise and enable approach: avoid companies involved in activities causing harm to biodiversity; minimise exposure to companies with negative impacts on biodiversity; and capture companies enabling positive impact on biodiversity through scoring high on biodiversity solutions. Importantly, this framework goes beyond simple exclusion criteria, positively screening for companies with low negative impact on biodiversity and those companies actively enabling the planet’s biodiversity – in line with COP15 goals.
“Investor focus on managing biodiversity impact has the potential to become as significant and enduring as the current focus on climate change,” says Lorraine Kelly, Global Head of Investment Stewardship at ISS. “The ISS STOXX Biodiversity Index Suite is the latest example of ISS ESG powering highly differentiated index offerings and we are delighted to partner with Qontigo on this series.”