Mercer is increasing the sophistication of its biodiversity impact measurement and monitoring to prepare for growing allocations in the theme, it says.
It comes as Mercer retained the IMPACT award for 'Fund of the year – multi-asset/other' after a year in which it further developed its approach to impact measurement across themes including biodiversity.
Garvan McCarthy, chief investment officer for EMEA and Asia-Pacific at Mercer, tells Environmental Finance the managers of the Private Investment Partners (PIP) VII Global Impact fund were proud of contributing to several impact outcomes.
These include enrolling more than 2,000 students from underrepresented backgrounds for an online healthcare education platform, and the generation of more than 8.5GW of renewable energy which ultimately led to the avoidance of about 74,000 tonnes of CO2 equivalent of GHG emissions, he says.
The global fund covers a broad spectrum of private market asset classes. It intends to contribute to the limitation of adverse impacts on the climate and associated environmental challenges and a more inclusive and equitable society by generating "demonstrable positive impact" across Mercer's impact themes.
Its holdings are focused on 'clean' technology, renewable energy, education, water and food, mostly via investments in other impact funds and co-investments alongside other investors.
PIP VII Global Impact closed in April 2024, having raised $431million.
Angelika Delen, head of impact solutions at Mercer, tells Environmental Finance the investor's approach to impact measurement enables it to contribute to positive impact and reduce negative impacts.
An EF Awards judge said Mercer's impact reporting was "very impressive and comprehensive... I find particularly interesting the negative impact approach with the UNEP FI Impact Radar Tool".
Mercer judges prospective investments using the Impact Management Project's Five Dimensions of Impact – covering 'who', 'what', 'how much', 'contribution', and 'risk' – to ensure alignment with Mercer's impact goals.
It also uses the Impact Radar Tool by the UN Environment Programme Finance Initiative (UNEP FI), to measure positive and potential negative impacts across sectors.
Mercer has also borrowed from work by the European Investment Bank to expand the coverage of its biodiversity impact 'mapping', including for wetlands, rivers and lakes, she says, and is working with a university in the Netherlands and in exchange with a farmers' community and platform for regenerative agriculture in Europe to develop the metrics and measurement further.
It regularly reviews its adjustments with UNEP FI "to make sure they are comfortable with our additions," says Delen.
It is more important for tracking impact on biodiversity than it is for other themes to establish a 'baseline' against which to measure changes, Delen argues, adding this is an area in which Mercer is building its own data.
Asked whether it uses third-party data on biodiversity, she says: "I have not met one data provider, who can deliver everything you need... We do everything in-house."
Investment opportunities in the theme are most common in forestry and agriculture – but adds: "I would love to see more biodiversity funds... knowing that everybody's talking about biodiversity, I still feel there is less action than talk. This is going to be an area for growth in the coming years."
