Introduction

The report examines tools for measuring the biodiversity and SDG (Sustainable Development Goal) impacts of financial portfolios. Driven by increasing regulatory pressures like the EU SFDR and the principle of double materiality, investors are now required to measure not just environmental risks to portfolios but also the impacts portfolios have on the environment. Biodiversity loss, ranked as a top-5 global risk (WEF 2020/21), underscores the need for tools to quantify these impacts. This report focuses on tools assessing listed asset portfolios, particularly for biodiversity and SDG impacts, excluding rating or risk-assessment tools.

Impact assessment tools for portfolio investors

Most tools adopt a footprinting methodology, combining corporate disclosures, third-party databases, and models to estimate impacts. Tools fall into two categories:

• Biodiversity-specific tools: Measure absolute impacts on biodiversity using metrics like Mean Species Abundance (MSA) or Potentially Disappeared Fraction (PDF).
• SDG/ESG holistic tools: Assess portfolios against SDG themes, integrating environmental, social, and governance factors but offering less granularity on biodiversity.

The agri-food sector, chosen for the case studies, highlights the critical link between economic activities and biodiversity loss, as it both impacts and relies heavily on natural ecosystems.

Case studies

Four tools—two biodiversity-specific and two SDG/ESG holistic—were applied to a sample portfolio of 10 agri-food companies:

• Corporate Biodiversity Footprint (CBF): The biodiversity footprint was concentrated, with 50%-80% of total impacts attributed to three companies, such as Nestle and Want Want China Holdings. Land use accounted for 90% of impacts, with the portfolio’s total biodiversity footprint estimated at -21.9 km² MSA.
• BIA-GBS (CDC Biodiversité): The portfolio’s biodiversity footprint totaled 170 MSAppb*, with Tyson Foods and ADM contributing over 80% of impacts. Detailed breakdowns revealed significant contributions from greenhouse gas emissions and nitrogen pollution.
• Portfolio Impact Footprint (PIF): The portfolio had a net negative impact of -135 basis points relative to the benchmark, driven by environmental harm and lack of sustainable product revenues. Positive contributions from economic activity in less developed regions were insufficient to offset the portfolio’s overall negative performance.
• SIFN (KPMG & CISL): The portfolio performed poorly on environmental metrics, such as freshwater use and GHG emissions, with holdings like JBS and Tyson Foods ranking in the bottom 20%-60% relative to the benchmark. Social metrics, such as revenue addressing basic needs, showed better results.

Key Finding: Across the tools, impacts were highly concentrated in a few companies, particularly in the agri-food sector. Holistic tools demonstrated better social performance, while biodiversity tools provided detailed, absolute insights into environmental pressures.

Strengths and limitations of tools

Biodiversity-specific tools deliver scientifically robust, absolute measures of biodiversity loss. However, they rely heavily on site-level data, have limited marine biodiversity coverage, and are costly. SDG/ESG holistic tools are broader, user-friendly, and align well with mainstream SDG frameworks. However, they focus mainly on GHG emissions, water use, and waste, offering less depth on biodiversity impacts.

Recommendations

Tool developers should harmonise biodiversity metrics, expand coverage to include marine biodiversity, and improve data granularity. Collaboration with financial institutions and regulators is essential to enhance transparency and investor understanding. Financial institutions should adopt these tools for portfolio construction, rebalancing, and engagement strategies. By integrating impact measurement, investors can align with regulatory frameworks like the SFDR and validate sustainability claims.

Regulators and policymakers must mandate expanded corporate disclosures to improve data quality, support impact measurement, and encourage transparency in financial products.

Outlook

While current tools provide backward-looking snapshots of impacts, they mark a crucial first step in aligning portfolios with sustainability goals. As tools evolve, forward-looking frameworks like the Task Force on Nature-related Financial Disclosures (TNFD) and the Science-Based Targets Network (SBTN) will enable investors to set nature-positive targets. These tools empower financial institutions to identify high-impact sectors, improve sustainability performance, and drive investments toward achieving global environmental and societal goals.