Table 9: Comparing coverage (corporate structure data vs. disaggregated revenue data); Source: FactSet

APPENDIX GUIDANCE A: COMPARING DIFFERENT DATA PROXIES

Table 12: Comparing the four different data sources

Advantages

Disadvantages

Assessment Asset-level data

Available for a broad range of industries. The largest asset coverage is reached by commercial providers. However, availability of open-source data is limited. See Appendix Guidance A: Overview of data providers, for a more comprehensive overview.

- Focus on corporate production facilities (which have the highest biodiversity relevance compared to, for example, real estate or office buildings). - Important attributes available.

- (Open-source) data sets can provide a false sense of completeness (since the number of sites per company can differ between commercial and open-source data sets). - Commercial data sets are costly. - Incorporation can be time consuming if company identifiers (such as ISIN or LEI) are missing. (For example:

The LEI (Legal Entity Identifier) is missing for 50 per cent of the cases in SFI’s cement and steel database.) - Available only for selected industries.

Recommended to use whenever available due to georeferenced, contextualised site-level data. (First, assetlevel data focuses on biodiversity-relevant production facilities. Second, the important contextual attributes facilitate a bottom-up risk measurement.) This proxy is a great starting point due to broad company coverage and low implementation costs. When using it, analysts should be aware of its limitations. Since the data product focuses on the corporate hierarchy, production plants might not be part of it when they do not belong to a separate legal entity (e.g., a subsidiary).

Company structure data

Having checked FactSet data, this data can be retrieved for almost 50,000 publicly listed companies (from a universe of around 60,000). However, the number of retrieved sites per company varies a lot (for 5,457 companies we retrieved more than 10 sites, but for around 45,000 companies, fewer than 10). Data points that are available in (all) commercial data sets. The coordinates of the headquarters can be used to run the assessment. This data is available for millions of listed and non-listed companies across the globe. Broad coverage, in particular for publicly listed companies. FactSet, for example, provides this information for around 30,000 companies (see Table 9).

- Available in a well-structured format, including industry classifications and company identifiers, which allows for smooth integration. - Regarding coverage, Bloomberg, FactSet and other data providers provide this data for a broad universe of companies.

- Relevance of the sites is not entirely clearsince many subsidiaries are not associated with the company’s main business line. -Since the data product focuses on the corporate hierarchy, production plants might not be part of it when they do not belong to a separate legal entity (e.g., a subsidiary). - Missing location (e.g., coordinates) and industry classification values require a work-around (described in the step-by-step guidance) or to drop observations. It can provide a false sense of completeness if a company has in fact several physical assets spread across the globe. The accuracy of this proxy relies on the assumption that most production is linked to the headquarter (putting aside the supply chain). - The spatial granularity is only at the country level which makes it difficult to accurately incorporate the importance and local integrity of biodiversity indicators into the analysis. - The precise revenue distribution per industry and country is not known and analysts must assume that revenue is homogenously distributed across industries and countries. - Revenue is a questionable proxy for physical assets in a country.

City of headquarters

Data points on the location of headquarters are, in principle, available from any third-party data provider. Also used and tested by the European Central Bank to explore physical climate-related risks of banks. Broadly available and low implementation costs. Disaggregated revenue by industry sector and by country, combined with the homogeneity assumption, has been frequently applied.

Only a backup option. Even though this proxy has been used by the ECB to run a risk assessment on millions of portfolio companies, the accuracy of the proxy relies on the assumption that 100% of the corporate production is linked to its headquarter.

Disaggregated revenue

Only a backup option due to severe limitations (see cell above) However, due to low implementation costs, this approach may suffice as a first screening tool.

APPENDIX GUIDANCE A: CASE STUDY – THE IMPORTANCE OF INPUT DATA

Asset-level data vs corporate structure data

As seen in Table 12, there are different data sources that can be used to build a comprehensive locationspecific database. While asset-level data stands out due to its contextualised attributes, corporate structure data can offer a promising solution due to its broad and accessible coverage. To investigate if the contextualised attributes of asset-level data provide additional insight regarding companies’ biodiversity risk, we have used the WWF BRF tool to analyse a collection of cement companies using asset-level data (from the SFI database) and corporate-level data (from FactSet).

Although corporate hierarchy data benefits from its broad scale (the FactSet database has around 50,000 data points, see Table 12) the number of sites per company varies widely. Figure 14 below shows the lobsided distribution of the top 1,000 companies in terms of number of sites.37

This distribution is partly because of a small concentration of very large global companies, but it also reflects the possible poor data quality that does not register all companies’ locations. If all of a company’s sites are not represented in a biodiversity risk analysis, it is likely that risk might not be adequately represented. Could asset-level data lend more accuracy to a biodiversity risk analysis?

Figure 14: Top 1000 FactSet companies by number of sites.

37 The distribution does not reflect the raw data from FactSet’s database but is already the result of some data cleaning, as suggested by the workarounds presented in Box 3. Downloading data from FactSet’s Data Management Solutions sometimes yields lists of several hundred locations for bigger companies. However, the quality of the location and sector information varies. We delete subsidiaries for which only the country is known and use a spatial extrapolation approach for subsidiaries with location information at city level. As for the sectoral information, some subsidiaries are linked to industry classifications that are different to the company’s main business model (for example, some 20 per cent of the subsidiaries of a big cement company are linked to financial services). In a second step, we keep only subsidiaries with a industry classification that is linked to the official corporate revenue reporting.