Identify

Understand impact associations and stakeholder needs.

Last updated: May 26, 2022

Overview

Whether at the institutional level (to determine or review overall company strategy), or for specific portfolios, funds or deals, investors and financial institutions need to decide which sustainability topics to manage. This may be partially predetermined by factors such as regulation (e.g. the EU’s climate change disclosure and related requirements such as the EU Taxonomy for Sustainable Activities), or specific investor mandates, both of which are core drivers of overall strategy and policies. In addition, investors and financial institutions can perform impact and stakeholder analyses to proactively understand their impacts, with a view to obtaining the associated risk management and business development benefits.

Stakeholder analysis

At the institutional level, investors and financial institutions can engage with their stakeholders (e.g. clients, employees, suppliers, civil society organisations, etc.) to help determine their priorities in terms of sustainability topics.

Stakeholder identification and engagement is also an important process in the context of certain types of specific investments and deals, such as project finance or impact investments. However, in many cases, it may be difficult to directly engage with the stakeholders associated with portfolios of investments, loans or underwritings.

Impact analysis

Investors and financial institutions can gain a more complete picture of the sustainability topics they are associated with by performing a portfolio-level impact analysis, considering in particular:

  • Portfolio exposure to different economic sectors and activities, and to different types of clients or underlying assets (e.g. SMEs, large companies, real estate, etc.). This will help clarify the investor or financial institution’s association with a range of positive and negative impacts.
  • The context of where clients or underlying assets are located and/or operating, with a view to understanding specific sustainability risks, needs and priorities in those locations.

Investors and financial institutions can obtain a more granular picture of the positive and negative impacts associated with their portfolios by performing, where possible, an impact analysis at the level of their individual investments, loans or underwritings.

In these cases, investors and financial institutions can conduct their own research whilst also relying on information provided by the investee or client, and/or by third parties. For example, if the underlying asset is a company, investors might conduct their own analysis of the business, and combine it with the company’s own assessment and disclosures on sustainability impacts that were identified as important to manage.

The impact analysis can be further consolidated with an appraisal of the status of the portfolio or individual investee’s/client’s dependencies on the various natural or social resources associated with the impact areas; for instance, a company’s reliance on water or labour.

Prioritisation of sustainability topics

The more complete the stakeholder and impact analysis, the more likely a greater number of sustainability topics emerge as being material or significant.

At the institutional level, this means that investors and financial institutions may need to prioritise certain sustainability topics over others. Prioritisation at this level can be guided by considerations such as:

  • the strength of the association between sectors/asset types/client types and the sustainability topics;
  • the prevalence of the most significant sectors/activities/clients within the overall portfolio; and
  • the interrelationships between different impact topics (i.e. prioritisation of one sustainability topic might enable others to also be addressed).

Prioritisation of certain sustainability topics at the institutional level does not imply that all others are removed from the scope of the investor or the financial institution’s impact management systems. At the individual investment or deal level in particular, provisions may be needed to avoid, mitigate or compensate negative impacts vis-à-vis certain sustainability issues, regardless of their overall level of prioritisation at the institutional level.


Resources

Advance: PRI stewardship initiative for human rights and social issues

Last updated: 2022

The overall objective of the Initiative is to advance human rights and positive outcomes for people through investor stewardship. The Initiative will primarily seek change through investors’ use of influence with portfolio companies. The following three expectations will be set for engagement focus companies:

  • Fully implement the UNGPs –the guardrail of corporate conduct on human rights
  • Align their political engagement with their responsibility to respect human rights
  • Deepen progress on the most severe human rights issues in their operations and across their value

Use this resource to:

  • Identify: Select the companies and sectors that investors can engage with, in support of the Initiative’s overall objectives. This includes identifying the sectors and companies where human rights and impacts are most severe.
  • Act: Determine where investors within the Initiative can influence (through stewardship) sectors and companies, to advance respect for human rights.

Bridging the gap: How infrastructure can contribute to SDG outcomes

This discussion paper details the current approaches that infrastructure investors are adopting to consider the Sustainable Development Goals as part of their investment approaches.

Use this resource to:

  • Identify: Identify outcomes caused by, contributed to and linked to their infrastructure investors, in relation to the SDGs.
  • Act: Understand the methods by which infrastructure investors can achieve desired SDG outcomes. Ensure that outcomes in line with the SDGs are integrated into infrastructure investment processes.

CDP Financial Services Disclosure System

Last updated: 2021

Tools for investors, companies, cities, states and regions to manage their environmental impacts. The CDP Financial Services Disclosure System allows for a baseline assessment of climate-related risks, opportunities and impacts in financing portfolios; and of how banks, asset owners, asset managers and insurance companies are preparing for the net-zero carbon transition.

CDP’s Disclosure System

Last updated: 2021

Tool for investors, companies, cities, states and regions to manage their environmental impacts. The CDP Disclosure System supports companies in making their environmental impact transparent to stakeholders, better understanding how they can reduce their impact, and act to become environmental leaders.

For organisations

Use this resource to:

  • Identify sustainability topics: Fill in CDP’s questionnaires to understand the relevant climate change, forests and water security impacts to measure, based on the organization’s size, sector, and geography.
  • Measure sustainability performance: Use CDP’s questionnaires as sets of environmental metrics.
  • Assess impact: Fill in the questionnaires to track change in performance over time. Each question is scored – some with reference to social or ecological thresholds – to help the organisation determine whether it is performing sustainably on that topic.
  • Disclose: Report to all stakeholders on climate change, forests and water security. The questionnaires provide a framework for companies to report environmental information to their stakeholders covering governance and policy, risks and opportunity management, environmental targets and strategy, and scenario analysis. Receive an A-D grading based on questionnaire responses.
  • Benchmark: Tool allows companies to benchmark their environmental performance against their industry peers and receive feedback on their progress each year. The information disclosed is also used by financial markets for stewardship and engagement, in investment research, new financial products, and global indices and ratings.

For investors and financial institutions

Use this resource to:

  • To be completed.

 

Corporate Impact Analysis Tool

Last updated: 2021

Tool to help banks and investors understand the actual and potential impacts of their clients and investee companies, as part of their impact management strategies and processes.

For organisations

Use this resource to:

  • Set and revise objectives: Financial institutions can use the tool to co-define relevant and meaningful objectives for their clients and/or investee companies. It provides an impact analysis and management workflow that starts from the identification of impact associations and needs, facilitates the collection and assessment of impact performance data, and accordingly enables an action plan and specific objectives to be set and monitored over time.
  • Identify sustainability topics: Use the tool to identify impact areas and topics (economic, environmental and social) associated with corporate clients and/or investee companies, based on an objective review (cartography) of the company’s sectoral and geographic breakdown. The tool contains collated research on the association between sectors (ISIC – International Standard Industrial classification) and 22 Impact Areas that cover all the SDGs, as well as a framework to enable a contextualisation of impact associations vis-à-vis the impact needs present in the company’s country(ies) of operation.
  • Measure sustainability performance: Use the Indicator Library embedded within the tool to review existing metrics for impact measurement. UNEP-FI has collated metrics from reporting standards and frameworks (GRI, SASB, CDP, TCFD), impact investor and development bank resources (IRIS+ and HIPSO), government taxonomies (EU Adaptation and Mitigation Taxonomies) and other sources to support indicator selection and interoperability between frameworks. This indicator library primarily supports use of the tool, but is also a useful standalone resource.

For investors and financial institutions

Use this resource to:

  • Identify: Understand the impact areas and topics associated with a corporate client/investee based on company type, sector and context; identify the company’s most significant impact areas.
  • Assess: Assess the company’s current practice and performance vis-à-vis its most significant impact areas, by combining the tool’s ‘identification’ outputs with additional data; determine the company’s overall ‘impact status’ as a basis for engagement.

Driving meaningful data: financial materiality, sustainability performance and sustainability outcomes

Last updated: 2020

A framework that incorporates financial materiality and sustainability performance calibrated to progress on sustainability outcomes. This resource also considers sources of data needed to complete this picture across entities such as companies, governments and global institutions and activities.

Use this resource to:

  • Identify: Identify current and forward-looking information that assesses the range of sustainable risks and opportunities.
  • Assess: Assess and interpret a company’s sustainability performance and alignment in the context of long-term sustainability goals and thresholds.

Due Diligence for Responsible Corporate Lending and Securities Underwriting

Last updated: 2019

The overall objective of the Initiative is to advance human rights and positive outcomes for people through investor stewardship. The Initiative will primarily seek change through investors’ use of influence with a global framework for financial institutions to identify, respond to and publicly communicate on environmental and social risks associated with their clients.

Use this resource to:

  • Governance: Embed responsible business conduct into policies and management systems.
  • Identify: Understand the expectations of responsible business conduct, including a discussion of key considerations when identifying negative impacts and risks.
  • Assess: Understand the key considerations in carrying out due diligence as recommended by the OECD Guidelines for Multinational Enterprises (OECD Guidelines). This helps to prevent and address adverse impacts related to human and labour rights, the environment, and corruption caused by financial institutions in the context of their corporate lending and underwriting activities.
  • Monitor: Monitor due diligence processes to prevent and address adverse impacts related to human and labour rights, the environment, and corruption caused by companies.

EU Taxonomy

Last updated: 2020

Regulation that sets out performance thresholds for organisations to classify their economic activities as “sustainable” according to European policy objectives.

For organisations

Use this resource to:

  • Identify sustainability topics: Find the economic activities that correspond to the organisation and review what the taxonomy says about likely impacts on sustainability. This can be an input into identifying sustainability topics to measure. This regulation is based on research connecting economic activities to likely significant impacts on six environmental objectives. Currently, research related to objectives of climate change mitigation and adaptation are most developed.

For investors and financial institutions

Use this resource to:

  • Identify: Find the economic activities that correspond to the financial institution’s activities and review what the taxonomy says about likely impacts on sustainability. This can be an input into identifying sustainability topics to measure. This regulation is based on research connecting economic activities to likely significant impacts on six environmental objectives. Currently, research related to objectives of climate change mitigation and adaptation are most developed.
  • Assess: Assess whether underlying assets are sustainable. Underlying assets that fall under the taxonomy regulation will report on the portion of their revenue, capital expenditure and operational expenditure that are ‘taxonomy aligned’, and therefore considered a ‘sustainable investment’ according EU policy objectives.
  • Set targets: Set objectives for a portion of the portfolio to be ‘taxonomy-aligned’. Regulation provides investors with a set of performance thresholds that have to be met for an underlying asset to be viewed as operating sustainably in relation to one the EU’s six environmental objectives. Underlying assets that are ‘taxonomy aligned’ are generating sustainable outcomes and are therefore also ‘Benefiting stakeholders’.

Finance Sector Supplement

Last updated: 2018

The overall objective of the Initiative is to advance human rights and positive outcomes for people through A framework for financial institutions – including banks, investors and insurers – to measure and value natural capital impacts and dependencies across the entities and portfolios that they finance, invest in or underwrite.

Use this resource to:

  • Strategy: Establish the business case for undertaking a natural capital assessment that is relevant to your institution.
  • Identify: Define what should be included in your natural capital assessment.
  • Assess: Interpret results and identify actions that you can take.

Global guidance on the integration of environmental, social and governance risks into insurance underwriting

Last updated: 2020

The first global guide to manage ESG risks in risk assessment and insurance underwriting. It has an initial focus on non-life insurance business—also known as property and casualty insurance business.

Use this resource to:

  • Identify: Understand the materiality of ESG risks to various lines of business and economic sectors, including characteristics which might affect the ability to assess and mitigate such risks.
  • Assess: Develop approaches to assess ESG risks in non-life insurance business transactions, particularly industrial and commercial insurance business.
  • Act: Address the growing concerns by stakeholders across society (e.g. NGOs, investors, governments).

GRI Topic-specific Standards

Last updated: n/a

Reporting standards designed to help organisations understand and disclose their impacts in a way that meets the needs of multiple stakeholders. These standards are arranged by a set of Universal Standards that apply to all organisations, and 35 Topic Standards that contain disclosures for impacts related to economic, environmental and social topics.

For organisations

Use this resource to:

  • Measure sustainability performance: Identify metrics to measure for each significant topic. The standards themselves provide guidance on selecting metrics to report. Using standardised metrics helps the organisation and its stakeholders compare performance with others.
  • Disclose: Report to all stakeholders on ‘material topics’ that reflect the organisation’s most significant impacts.

For investors and financial institutions

Use this resource to:

  • Identify: Refer to the Sector Standards as a starting point for identifying likely significant impacts.
  • Disclose: Report to all stakeholders on ‘material topics’ that reflect the organisation’s most significant impacts. The Sector Standards are a helpful starting point for identifying likely significant impacts.

Guiding Principles on Business and Human Rights

Last updated: 2012

The UN Guiding Principles on Business and Human Rights are a set of guidelines for States and companies to prevent, address and remedy human rights abuses committed in business operations.

Use this resource to:

  • Strategy: Adopt the standards and practices with regard to business and human rights so as to achieve tangible results for affected individuals and communities, and thereby also contribute to a socially sustainable globalisation.
  • Governance: Embed the human rights policy throughout a business’ functions.
  • Identify: Understand the responsibility of enterprises to respect human rights, depending on their scale and scope.
  • Assess: Implement human rights due diligence.
  • Set Targets: Design targets based on human rights due diligence assessment.
  • Act: Learn how states and companies can prevent and address negative impacts on human rights by business.
  • Monitor: Set up continued human rights due diligence for monitoring purposes.
  • Disclose: Make publicly available human rights commitments and processes.

Impact Mappings

Last updated: 2021

The excel-based Impact Mappings are standalone versions of the research embedded in UNEP-FI’s Impact Analysis Tools, split into two parts.

First, the Sector Mappings show the strength of connection between economic activities (using ISIC classification) and positive and negative impacts (using UNEP-FI’s 22 Impact Areas). Second, the Needs Mappings track a selection of indicators at global and country level as a way to estimate the sustainable development needs in different geographies.

For organisations

Use this resource to:

  • Identify sustainability topics: Cross-check the organisations economic activities and geographic location against the Impact Mappings when identifying sustainability topics to measure.

For investors and financial institutions

Use this resource to:

  • Identify: Understand the impact areas and topics associated to different economic activities by consulting the Sector-Impact map; understand both positive and negative associations; identify key sectors for different impact areas and topics.
  • Assess: Review existing indicators and metrics for impact assessment by consulting the Indicator Library. Indicators and metrics from reporting standards and frameworks (GRI, SASB, CDP, TCFD), impact investor and development bank resources (IRIS+ and HIPSO), government taxonomies (EU Adaptation and Mitigation Taxonomies) and other sources have been collated to support indicator selection and interoperability between frameworks.

Investing with SDG Outcomes: A Five-part Framework

Last updated: 2020

A high-level framework for any investors looking to shape real-world outcomes in line with the Sustainable Development Goals (SDGs).

Use this resource to:

  • Identify: Identify and understand the unintended outcomes of an investors’ investments and their own operations. This assessment involves identifying positive and negative real-world outcomes related to investees’ operations, products and services.
  • Act: Explore examples of how investors shape outcomes through investor actions including: investment decisions, stewardship of investees and engagement with policy makers and key stakeholders.
  • Set Targets: Move from identifying and understanding unintended outcomes towards taking intentional steps to shape outcomes. 

Investment Portfolio Impact Analysis Tool

Last updated: 2021

Tool to help investors holistically understand and manage the actual and potential impacts of their portfolios.

Use this resource to:

  • Set and revise objectives: Set relevant and meaningful objectives by using the tool. It provides an impact analysis and management workflow that starts from the identification of impact associations and needs, facilitates the collection and assessment of impact performance data, and accordingly enables specific targets to be set and monitored over time.
  • Identify sustainability topics: Identify impact areas and topics (economic, environmental and social) associated with a portfolio, based on an objective review (cartography) of the portfolio, sectoral and geographic breakdown. The tool contains collated research on the association between sectors (ISIC – International Standard Industrial classification) and 22 Impact Areas that cover all the SDGs, as well as a framework to enable a contextualisation of impact associations vis a vis the impact needs present in the country/ies of operation of the bank and its clients.
  • Measure sustainability performance: Review existing metrics for impact measurement by consulting the Indicator Library embedded within the tool. UNEP FI has collated metrics from reporting standards and frameworks (GRI, SASB, CDP, TCFD), impact investor and development bank resources (IRIS+ and HIPSO), government taxonomies (EU Adaptation and Mitigation Taxonomies) and other sources to support indicator selection and interoperability between frameworks. This indicator library primarily supports use of the tool, but is also a useful standalone resource.Investors may also refer to the Real Estate Impact Analysis Tool which uses a complementary approach for real estate portfolios.

Investors may also refer to the Real Estate Impact Analysis Tool which uses a complementary approach for real estate portfolios.

Use this resource to:

  • Identify: Use the tool to identify impact areas and topics (economic, environmental and social) associated with an investment portfolio, based on an objective review (cartography) of the portfolio, sectoral and geographic breakdown.
  • Assess: Assess your current practice and performance vis a vis its most significant impact areas by combining the tools ‘Identification’ outputs with additional data; use the assessment as a basis for target-setting and to define the bank’s action plan.

IRIS+ for Impact Due Diligence

Last updated: 2020

Guidance on constructing due diligence questions based on the investor’s impact goals.

Use this resource to:

  • Identify: Use for impact due diligence, specifically the anticipated impacts before an investment decision.
  • Assess: Integrate impact measurement and management into the due diligence process to aid in assessing and managing impact risk.
  • Monitor: Construct a set of due diligence questions that uses the IRIS+ system and evidence base.

IRIS+ Thematic Taxonomy

Last updated: 2021

Guidance on IRIS+ Impact Categories and Impact Themes.

Use this resource to:

  • Identify: Understand and frame portfolio objectives using the Impact Themes and Impact Categories contained in the Thematic Taxonomy.

OECD Due Diligence Guidance for Responsible Business Conduct

Last updated: 2018

Guidance that provides practical support to enterprises on the implementation of the OECD Guidelines for Multinational Enterprises by providing plain language explanations of its due diligence recommendations and associated provisions.

For organisations

Use this resource to:

  • Governance, strategy, and management approach: Assist enterprises with developing and strengthening their due diligence system, as well as processes related to impacts in operations, supply chains, and business relationships.

For investors and financial institutions

Use this resource to:

  • Governance: Embed responsible business conduct into policies and management systems.
  • Identify: Use guidance for expectations of responsible business conduct, including a discussion of key considerations when identifying negative impacts and risks.
  • Assess: Understand the key considerations in carrying out due diligence, as recommended by the OECD Guidelines for Multinational Enterprises (OECD Guidelines). This helps to prevent and address adverse impacts related to human and labour rights, the environment and corruption caused by companies.
  • Monitor: Monitor due diligence processes to prevent and address adverse impacts related to human and labour rights, the environment, and corruption caused by companies.

Portfolio Impact Analysis Tool for Banks

Last updated: 2021

Tool to help banks and investors holistically understand and manage the actual and potential impacts of their portfolios.

Use this resource to:

  • Identify: Understand the impact areas and topics associated to your bank’s portfolio based on portfolio composition and context, identify the bank’s most significant impact areas.
  • Assess: Assess your bank’s current practice and performance vis a vis its most significant impact areas by combining the tools ‘Identification’ outputs with additional data; use the assessment as a basis for target-setting and to define the bank’s action plan.

Responsible Business Conduct for Institutional Investors

Last updated: 2017

Guidance that explains the application of the OECD Guidelines for Multinational Enterprises in the context of institutional investors. The report highlights key considerations for institutional investors in carrying out due diligence that will help to identify and respond to environmental and social risks.

Use this resource to:

  • Governance: Embed responsible business conduct into policies and management systems.
  • Identify: Understand the responsible business conduct expectations for institutional investors, including a discussion of key considerations when identifying negative impacts and risks.
  • Assess: Understand the key considerations for institutional investors in carrying out due diligence as recommended by the OECD Guidelines for Multinational Enterprises (OECD Guidelines). This helps institutional investors to prevent and address adverse impacts related to human and labour rights, the environment, and corruption caused by companies in their investment portfolios.
  • Monitor: Monitor due diligence processes to prevent and address adverse impacts related to human and labour rights, the environment, and corruption caused by companies in their investment portfolios. 

SASB Materiality Map

A visual and interactive tool to explore SASB’s disclosure topics across its industries and sectors.

For organisations

Use this resource to:

  • Identify sustainability topics: Use the tool to identify the industry-specific disclosure topics and associated metrics. SASB’s research process identifies the subset of environmental, social, and governance issues reasonably likely to materially impact financial performance of the typical company in an industry.

For investors and financial institutions

Use this resource to:

  • Identify: Identify the industry-specific disclosure topics and associated metrics. SASB’s research process identifies the subset of environmental, social, and governance issues reasonably likely to materially impact financial performance of the typical company in an industry.
  • Assess: Review metrics which measure sustainability topics that likely have financial repercussions for an underlying asset.

WBA Benchmark Methodologies

Last updated: 2021

Benchmarks that rank companies based on their impact. The WBA recognises that transformations are needed to achieve sustainability across seven systems. In each of these seven systems, companies that have a big role to play in hindering or advancing progress towards a sustainable future are identified as ‘keystone’ companies. WBA then develops a publicly available methodology for each system (or component of a system), drawing on existing standards to identify relevant topics and associated metrics for companies to disclose against.

For organisations

Use this resource to:

  • Identify sustainability topics: Find the methodology that corresponds best to the ‘system’ that the organisation operates within. WBA’s publicly available benchmark methodologies are developed through detailed research and public consultation, so an organisation can benefit from reviewing the list of topics in the relevant ‘system’ when identifying sustainability topics to measure.

For investors and financial institutions

Use this resource to:

  • Identify: Understand the impact of (primarily) multinational companies across seven system transformations needed on the path to a sustainable economy and society.

Why and how investors should act on human rights

Last updated: 2020

This paper sets out how investors can ensure they respect human rights across all their investment activities, as defined by the UN and OECD.

Use this resource to:

  • Identify: Understand which actual and potential negative human rights outcomes investors are connected to through their investments.
  • Assess: Understand the extent to which investors are facilitating human rights harm; the extent to which they could or should have known; and the quality of any mitigating steps.

Definitions

Strategy

A plan for achieving something or reaching a goal.

Source: Cambridge English Dictionary

Investor

A person, organisation, or country that puts money into an business or other organisation.

Source: Cambridge English Dictionary

Sustainability topic

A term used broadly to denote aspects of stakeholder well-being (e.g. health, wealth, safety), or business activities or practices that are evidenced drivers of well-being (e.g. employment, diversity and inclusion). This term is synonymous with ‘sustainability matters’, ‘impact areas’, ‘impact categories’ or ‘general issue categories’ which are similar terms used by different standard setters.

Source: OECD Well-being Framework; Global Reporting Initiative (GRI) Sustainability Topics; Sustainability Accounting Standards Board (SASB) General Issue Categories; IRIS+ Categories; United Nations Environment Programme Finance Initiative (UNEP FI) Impact Areas

Impact

A change in an aspect of people’s well-being or the condition of the natural environment caused by an organisation.

Source: Impact Management Platform; Well-being defined as in OECD Well-being Framework

Stakeholder

An entity or individual that can reasonably be expected to be significantly affected by the organisation’s activities, products and services, or whose actions can reasonably be expected to affect the ability of the organisation to successfully implement its strategies and achieve its objectives.

Source: Global Reporting Initiative (GRI); OECD Due Diligence Guidance for Responsible Business Conduct; OECD Well-being Framework; Value Reporting Foundation (VRF) Integrated Reporting Framework

Asset

Used on this site to refer to a security such as debt or equity issued by an organisation, or a physical asset such as land or a building.

Source: Adapted from Investopedia (definitions of ‘financial asset’ and ‘real asset’)

Context

Refers to the circumstances that form the setting for an event, statement, or idea, and in terms of which it can be fully understood. Here the term specifically refers to the other information that an organisation needs to collect to fully understand what type of impact has occurred, in order to make a judgement about the nature of the performance. This contextual information is sometimes referred to as the multi-dimensional nature of impact. See Assess Impacts.

Source: Oxford English Dictionary

Dependencies

When an organisation’s impacts, or changes in the external environment in which it operates, affect an organisation’s cash flows, or future cash flows, and therefore create or erode investors’ determination of its enterprise value.

Source: Value Reporting Foundation (VRF)

Material

Information is considered material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users make on the basis of the reported information.

Source: Adapted from International Accounting Standards Board (IASB)

Significant

An impact is significant if the change in well-being (or the condition of the natural environment) caused by the organisation is big and/or occurs for many people, lasts for a long time and is important to those affected. See Assess Impact for information on collecting these data points..

Source: Social Value International (SVI)

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