The first version of the Portfolio Impact Analysis Tool for Banks, launched in April 2020, represented a great step forward for holistic impact analysis in banking. The Tool, now in its second iteration, is designed to guide banks through an impact analysis of their portfolios. Developed jointly by the Positive Impact Initiative with signatories of the Principles for Responsible Banking and UNEP FI Member Banks, the Tool will help banks analyze the impacts associated with their consumer, business, corporate and investment banking portfolios. The analysis will enable banks to set targets where it matters in order to drive their contribution to society’s goals, as required by the Principles for Responsible Banking.
The Tool enables banks to identify their most significant impact areas based on the nature, content and geographic scope of their portfolios, and to assess their current level of performance vis a vis these impact areas. It further enables them to consider their current level of performance vis a vis a their most significant impact areas. The impact areas considered in the tool are those listed and described in the Impact Radar (Positive Impact Initiative, UNEP FI, 2018).
The purpose of such an analysis is for banks to set meaningful targets to increase their positive impacts and decrease their negative impacts. Meeting such targets is likely to require a combination of:
- client engagements – i.e. promoting transitions and innovations within clients
- portfolio adjustments – i.e. reducing and/or phasing out certain activities, or scaling up certain activities
The Tool is open-source. It is a priority for UNEP FI to ensure transparency and replicability. All technical specifications are provided inside the Tool.
Download the User Guide for Version 1 here
Download the Demo version of Version 1 of the tool here
You can watch and listen to an interactive walk-through of Version 1 of the tool, featuring the experiences and learnings of the Tools’ early users here (morning session) and here (afternoon session).
The development process of the Portfolio Impact Analysis Tool for Banks was conducted over a period of 10 months through a Working Group made up of Signatories of the Principles for Responsible Banking and UNEP FI Member Banks, led by the Positive Impact Initiative.
Frequently Asked Questions
- How can asset managers draw insights from the portfolio impact tool at this point? Being mindful that asset management was currently not in scope…
- Is there any tool appropriate for insurance sector? The same as the one dedicated to banking sector?
It is intended that additional portfolios and activity types – such as asset management and insurance – be added to the scope of the tool over time, based on interest and need. This will be determined as the new Working Groups become operational in April-May.
Using the Tool
- A bank that is active globally in almost all sectors will probably not undertake an analysis on its whole portfolio. Can a bank undertake an analysis of a specific portfolio, e.g. lending to fossil fuel companies?
Yes it is possible to undertake a partial analysis. It is anticipated that holistic impact analysis will happen iteratively over time. The consumer, business, corporate and investment portfolios analyses can be conducted independently of each other.. Within those, you may chose to focus on certain countries and industries. It should be noted however that single-sector focus will yield less insights and reveal less new information and opportunities than considering a sample of several sectors and activities.
- How we should use the banking tool when assessing a portfolio of loans to individuals (not corporate)?
Consumer Banking, i.e. banking products and services for individuals (with the exception of HNWI), is one of the four portfolio types covered by the Tool. The Tool considers the numbers and typology of clients, as well as the product and service typology, in addition to country needs.
- Any suggestion in quantifying and incorporating green finance items (like sustainability linked loan, green bond) in this tool?
On the one hand, with the Portfolio Tool, banks gain an understanding of the impact performance of their different portfolios. Since the analysis distinguishes environmental, social and economic impact areas, ‘green finance’ can be specifically tracked. On the other hand, by virtue of the systematic and comprehensive nature of the analysis, the Tool will reveal additional opportunities for green finance. For instance, it might highlight resource intensive portfolios which would benefit from resource efficiency targets. Thus the tool can be used to inform the development and issuance of dedicated products such as sustainability linked loans or green bonds.
- Does the Tool cover all business lines?
Almost. The Tool currently covers Consumer Banking, Business Banking, Corporate Banking and Investment Banking. It does not cover Private Banking and Capital Markets. Additional activities such as Asset Management and Insurance are also not currently covered.
- Can I make adjustments to the Tool?
Yes, as long as this is done for internal purposes and without a view to commercialising the methodology. Full technical specifications are included in the Tool to enable multiple forms of usage. Kindly acknowledge UNEP FI and provide transparency on adjustments as required.
- Will the Tool be updated over time?
Yes. Updated versions will be posted on the UNEP FI website.
Link Between the PII Impact Analysis Tools & Principles for Responsible Banking Implementation
- Do you think this tool can be used for the implementation of the Principles for Responsible Banking? Given that the objective of the Principles for Responsible Banking is to scale up the financial sector’s contribution to meeting the SDGs.
- For a bank in the process of implementing the Principles for Responsible Banking, would you recommend doing both top-down and bottom-up assessments or using just the bank impact analysis tool?
Yes, the tools can be used for the implementation of the Principles for Responsible Banking. This was precisely the motivation for developing the Portfolio Tool; it is a means to comply with the first step of compliance, impact analysis as a basis for meaningful target-setting. The Corporate tool is also important for implementation; once targets have been set banks will need to take action on their portfolios and therefore with their clients. Having identified their most significant impact areas they will be in a position to use the Corporate tool on those clients that are linked to these impact areas in order to determine impact targets and action plans together.
Country Needs Mapping
- Regarding the portfolio profiles: how do you get or how do you build the ratings indicated by country and impact segment?
- Are the indicators for company’s management pre-filled based on identified impact radar categories, or based on user input?
- Both tools share the country needs score table which is sparsely populated (18 countries, mostly developed). For it to be useful, this would need to be filled in for major developing countries at least. Do you by any chance plan to do this in the near future?
- How to decide ‘my value’? Does it need to be certified?
Country impact needs are rated 1-4 (low to very high level of need) based on a set of resources listed in the tool (Country Need Scores worksheet). The indicators and thresholds are based on these resources and likewise outlined in the tool.
Country impact needs are partly pre-filled, based on mapping that was conducted as part of the activities of the Working Groups that developed and tested the tool. This did not, however, cover all countries, so for most countries users will need to do their own mapping. To facilitate this the list of resources, indicators and thresholds are included directly in the tool. The idea is that over time as users perform the mapping for additional countries, these mappings also be added into the tool, until we reach global coverage. Updates will be provided regularly on the UNEP FI website.
Note that even where the mapping is prefilled, it is always possible to amend the default values, should you have additional resources and information that you are able to factor into the mapping. This is explained in detail inside the tool itself under the corresponding worksheets.
No certification is required for the value you confirm as ‘my value’ under the country need mapping; if you use the resources, indicators and thresholds indicated in the tool, all users will arrive to the same conclusion. If you use additional information, which may trigger variations, the expectation is that you clearly indicate what those additional resources are and how you applied them. There is a dedicated space for this inside the corresponding worksheet. You may however wish to seek 3rd party assurance for your analysis as a whole; the 3rd party assurance provider will in this case be reviewing your coverage of country needs mapping.
- Do you look at countries from the angle of where the company is selling their goods into or where they are operating?
- Do you look at impact from operations or goods/services produce, or do you mix them up?
Both. In fact the tool looks at three types of countries of operation: countries of sales, countries of production and countries of sourcing.
- What does the term “climate” cover in these tools? Is it limited to GHG emissions? Is it limited to mitigation measures? What about adaptation & resilience? Doesn’t it overlap all the resource aspects, energy generation, etc?
Climate is defined in the Impact Radar as per the IPCC: Composition of the global atmosphere and its exposure to greenhouse gas (GHG) emissions as a direct factor contributing to climate change. International source: Intergovernmental Panel on Climate Change. Both mitigation and adaptation considerations have been taken into account when mapping the positive and negative associations of different sectors and activities with the climate ‘impact area’. Yes there are of course interlinkages with the resource efficiency ‘impact area’ – as a result you will find that sectors and activities that are very resource intensive are often also marked as negatively associated with the climate impact area.
- How will the tools definitions align with the EU taxonomy?
- How do the Impact Analysis Tools relate to the EU Taxonomy for sustainable activities, if at all? What are the synergies between the two, if any?
The tool does not include a new or different set of indicators to those in existence. While the 22 impact areas are spelt out, indicators of positive and negative associations are not predefined. Instead users are pointed to existing indicator sets, including those of the EU taxonomy (for climate impacts). This happens at the assessment stage, in the review of companies’ (or bank’s) performance. As part of the development process going forward, it is the intention to provide additional guidance on the applicability of existing indicators and metrics. We are also keen to promote more collaborative and targeted research on the important gaps that remain in the field of identifying relevant impact indicators for business.