Developed by UNEP and UNEP-WCMC, the Directory is designed to support financial institutions to identify and measure how their investments generate positive environmental and social impacts. This is particularly important for the land use sector, which is especially complex and hard to measure. Users can be guided through which of the 23 indicators are most appropriate to their projects and capabilities, or view the full list of indicators 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 initial development, drawn from existing funds and wider sustainable investment initiatives. The indicators were further updated in 2023, strengthening the livelihoods and gender aspects and adding a new indicators around sustainable production. This process has resulted in 23 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, Forests, Livelihoods, Climate Action and Sustainable Production.
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. Integrating these indicators into investors' impact strategies helps to ensure contributions to the SDGs, as well as the three Rio Conventions on Climate Change, Biodiversity and Desertification.
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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 23 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.
Updates to the Indicators Directory went live in August 2023. The updates built on learnings from work with impact funds in the three years between the initial development of the indicators and the updates, and reflect changes in best practice in that period.
The big changes were:
- Combine the impact areas of Climate Mitigation and Climate Adaptation into a new impact are called Climate Action.
- Add a new impact area called Sustainable Production to capture indicators relating to agricultural yield and value chains.
- Strengthen existing indicators within Biodiversity and Forests impact areas, and streamline them.
- Add a stronger gender element to the Livelihoods impact area.
A summary of all the changes can be found here.
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.
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 PRO 02 (Agricultural area covered by sustainable production techniques), or a carbon certification scheme in conjunction with CMA 02 (GHG emissions avoided due to non-conversion of natural habitat).
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 (2023) 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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