Developed by UNEP and UNEP-WCMC, the Directory is designed to support decision making within financial institutions in regards to identification and measurement of how investments generate positive environmental and social impacts. Users can be guided through which of the 19 indicators are most appropriate to their projects and capabilities, or view the full list of KPIs and filter them by impact area and related SDGs.
This Directory was developed in consultation with UNEP's Environmental & Social Knowledge Exchange Network (ESKEN) including public donors, impact fund managers and technical monitoring specialists. More than 180 indicators were reviewed as part of the directory's development, drawn from existing funds and wider sustainable investment initiatives. This process resulted in 19 technically sound and relevant indicators to inform more consistent impact measurement. They have been organised into five impact areas identified as priorities by the ESKEN community: Biodiversity, Climate Mitigation, Climate Adaptation, Forests, and Livelihoods.
The indicators provide guidance on the best available methods to monitor and report environmental and social impacts. Depending on the user's objectives for monitoring positive impacts, it may be appropriate either to report against all indicators, or a selected few aligned to the user’s needs.
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While many financial institutions have begun to make commitments to reduce their negative E&S impacts, progress has so far been slow. Only a third have risk-management policies for deforestation covering the most significant commodities. Although the implementation of these policies will improve outcomes, financial institutions now need to think beyond risk management. They should consider how they can incentivise, monitor and report positive E&S impacts generated through their investment portfolios. Demonstrating positive environmental and social (E&S) impact will be key to ensuring an increase in blended finance instruments and private capital flows into sustainable practices.
This Directory is a curated shortlist of recommended land-use finance indicators to accelerate harmonisation of reporting in this space. The 19 indicators have been selected from over 180 compiled from existing impact funds and wider sustainable investment initiatives, including the IRIS+ Forest, Agricultural and Livelihoods indicators. By compiling and condensing such a range of indicators, we hope to provide some clarity in the bewildering array of options for impact measurement. We also hope to encourage a harmonisation of reporting requirements in this space, so that projects can be compared more easily. The process of compiling the selected indicators was conducted through extensive consultation with representatives from investment funds, banks, donors and non-governmental organisations.
The Directory has been compiled with input from, and considering the needs of impact investors and blended finance funds. However, we hope that other financial institutions and impact-orientated organisations will also find the tool helpful in informing their thinking.
This tool is not designed to provide methodologies to verify or certify positive impacts, such as developing carbon credits. However, if this is the desired outcome, then additional resources can be sought specific to each of the impact areas of interest, and these could be used alongside the relevant indicators which they might align with. For example, a sustainable agriculture certification could be used alongside LIV 04 (Number of farmers trained in, and technology transferred for, best management practices in sustainable agriculture/forest protection), or a carbon certification scheme in conjunction with CLM 03 (GHG emissions avoided due to non-conversion of native vegetation).
As part of the consultative process with the ESKEN community, KPIs were chosen based on those which were frequently used and agreed upon broadly across the range of stakeholders. Although there is not a single indicator for sustainable agriculture, different aspects of sustainable agricultural financing can be measured under a number of indicators in the Directory. For example:
- BIO 03 - Area of avoided conversion of Natural Habitat
- CLM 04 - GHG emissions reduced from changes to on farm practices
- CLA 01 - Number of people in local communities whose resilience has been improved as a result of project activities
- LIV 04 - Number of farmers trained in, and technology transferred for, best management practices in sustainable agriculture/forest protection
We are aware that using indicators for sustainable agriculture can be challenging, as defining one metric for a level that works globally can be demanding. Other organisations have attempted to characterise sustainable/regenerative agriculture KPIs, and we would refer users to these in the first instance: the Global Farm Metric, and OP2B’s Framework for Regenerative Agriculture.
In the development of the Directory, members of the ESKEN community requested KPIs specifically related to deforestation-free and forest positive investments, as these were a focus for their funds. This is how the Forest impact area came about, where indicators are specifically focused on forest management and protection.
However, not all habitats of high biodiversity value are forests, and so depending on the investment or project using the broader term ‘natural habitat’ can be more helpful. Natural or critical habitats encompass all manner of biodiverse habitats, including forest.
Due to this potential for double counting of forest, users should ensure that when choosing indicators for their project or portfolio they tailor them to the habitats expected, and use either forest KPIs, or natural/critical habitat KPIs, depending on the variety of habitats in the project area.
The UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) is a global Centre of excellence on biodiversity. The Centre operates as a collaboration between the UN Environment Programme and the UK-registered charity WCMC. Together we are confronting the global crisis facing nature.
UNEP & UNEP-WCMC (2022) Land Use Financing Impact Hub – Positive Impact Indicators Directory. Cambridge, UK
This work has been conducted through the generous support of the Government of the Grand Duchy of Luxembourg's Ministry of Environment, Climate and Sustainable Development, and the Proteus Partnership. We would like to thank members of the Environmental & Social Knowledge Exchange Network for their guidance and feedback during the consultation which contributed significantly to the development of this tool.
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