Embedding sustainability into investment strategies

for investors

Our framework enables investors to evaluate the strategic sustainability approach of portfolio companies and potential investments. Apply one consistent methodology across firms, compare ambition and management quality, and identify risks and opportunities.

PI Strategy Framework

PI Strategy Framework

We provide a single, comparable view on how sustainability sits inside each company’s strategy – not fragmented ESG scores. The PI Strategy Framework translates management evidence into three investor-relevant scores plus benchmarking, enabling faster, better-informed investment decisions, engagement with direction, and clearer exit narratives.

 

PI Strategy Framework showing the five PI Ambition Levels representing five strategies to integrate sustainability PI Impact Accounting Framework, Impact Accounting Standard PI Value & Risk Framework, PI Strategy Framework PI Rahmenwerk zur Wirkungsbilanzierung, PI Wert & Risiko Rahmenwerk, PI Strategie Rahmenwerk

The Strategy Framework offers something new

  • A consistent, comparable methodology to assess multiple portfolio companies at once.

  • A clear understanding of each firm’s ambition level, integration into core strategy, and management quality.

  • The ability to benchmark portfolio firms against each other and identify leaders, laggards, and areas of risk.

This makes it possible to integrate sustainability considerations directly into your investment process – from pre-investment due diligence, to portfolio management, to exit readiness.

Explore sustainability strategies that make sense

Strategic Ambition Levels

Five strategic ambition levels: from Legal/Stakeholder Compliance to Sustainability Driven

Use cases

  • Due diligence & screening
  • Active ownership & value creation
  • Exit preparation & positioning
  • Portfolio management
  • Reporting

Materiality

How materiality assessments inform strategy

What to do with the results

 

Strategic ambition levels

The Strategic Ambition Levels

Our framework outlines five ambition levels that represent different strategic imperatives for integrating sustainability beyond legal requirements. In addition, we identify two additional variations – No Ambition and Only PR – which describe organizations that lack a credible sustainability strategy. These are not strategic approaches, and they often create significant reputational and operational risks.

As you move through the ambition levels, you’ll see a clear progression:

  • From risk management – productivity gains, growth, and ultimately brand strategy
  • From minimal integration – full strategic embedding
  • From reactive risk management – proactive leadership
Strategy 1 to integrate sustainability: Legal compliance (Focusses on reducing regulatory risks (changes in regulation); „We’ll monitor regulatory developments to be prepared for changes“; Unless it is prohibited, it is fine to do it / invest in it) PI Impact Accounting Framework, Impact Accounting Standard PI Value & Risk Framework, PI Strategy Framework PI Rahmenwerk zur Wirkungsbilanzierung, PI Wert & Risiko Rahmenwerk, PI Strategie Rahmenwerk
Strategy 2 to integrate sustainability: Stakeholder compliance (Focusses on reducing regulatory and reputational risks; „We'll do as much as necessary to manage reputational risks“; Obeying to minimum (ethical) standards and other requirements of the stakeholders if (contractually) required) PI Impact Accounting Framework, Impact Accounting Standard PI Value & Risk Framework, PI Strategy Framework PI Rahmenwerk zur Wirkungsbilanzierung, PI Wert & Risiko Rahmenwerk, PI Strategie Rahmenwerk
Strategy 3 to integrate sustainability: pragmatic (Focusses on reducing regulatory and reputational risks, and on productivity gains (e.g., cost savings); „We see productivity gains“; We manage blatant risks and opportunities where they emerge in our operative business) PI Impact Accounting Framework, Impact Accounting Standard PI Value & Risk Framework, PI Strategy Framework PI Rahmenwerk zur Wirkungsbilanzierung, PI Wert & Risiko Rahmenwerk, PI Strategie Rahmenwerk
Strategy 4 to integrate sustainability: strategic (Focusses on reducing regulatory and reputational risks, on productivity gains (e.g., cost savings), and revenue growth; „Sustainability gives us a competitive advantage“; We proactively manage growth opportunities and risks of our business) PI Impact Accounting Framework, Impact Accounting Standard PI Value & Risk Framework, PI Strategy Framework PI Rahmenwerk zur Wirkungsbilanzierung, PI Wert & Risiko Rahmenwerk, PI Strategie Rahmenwerk
Strategy 5 to integrate sustainability: Sustainability driven (Sustainability is a brand promise, naturally covering relevant aspects of the other strategies; „We need to make sure everybody does it“; The brand is defined by sustainability and only accepts economic success if it goes hand in hand with creating positive impacts) PI Impact Accounting Framework, Impact Accounting Standard PI Value & Risk Framework, PI Strategy Framework PI Rahmenwerk zur Wirkungsbilanzierung, PI Wert & Risiko Rahmenwerk, PI Strategie Rahmenwerk
Strategic Ambition Levels: Five Strategies to integrate sustainability from value protection (only) to Value Creation (competitive advantage) PI Impact Accounting Framework, Impact Accounting Standard PI Value & Risk Framework, PI Strategy Framework PI Rahmenwerk zur Wirkungsbilanzierung, PI Wert & Risiko Rahmenwerk, PI Strategie Rahmenwerk

A summary of each strategy

Note: On this page, “integration” includes the corresponding investment
(budget, staff, opex/capex) required to achieve it.

  1. Legal Compliance (Risk Management) – focused on being prepared for upcoming legal requirements; low integration; reactive risk management and without competitive advantages
  2. Stakeholder Compliance (Risk Management) – adds stakeholder expectations; slightly higher integration; still risk-focused and without competitive advantages
    1. Pragmatic – balances risk management with competitive advantage; moderate integration; focused on productivity gains and obvious opportunities
    2. Strategic – sustainability is a growth strategy/business driver; high integration; focused on growth, and long-term value
    3. The highest ambition level, Sustainability Driven, goes even further – where sustainability defines the brand and success is measured primarily by positive impacts created

use cases across the investment lifecycle

Our Strategy Assessment tools offer valuable insights for investors to gain insights and enhance sustainability strategies along the typical investor journey: before, during, and after an investment.

Intention
Rapidly and consistently assess target companies to judge strategic fit, upside potential, and downside risk.

What you can answer

  • Does this company’s sustainability strategy go beyond minimum compliance?

  • Does management have the capabilities to scale sustainability into operations?

  • Is this target a greenwash risk?

  • Could sustainability weaknesses create hidden costs, liabilities, or reputational risks?

  • How does the target compare to peers in ambition and integration?

Outcome / solutions

  • Evidence-based sustainability strategy assessment to include in due diligence packs.

  • Identification of greenwashing or “Only PR” risks before purchase.

  • Benchmark positioning against peers for valuation scenarios.

  • Clear basis for setting covenants, warranties, or integration requirements post-close.

Intention
Track progress, prioritize engagement, and turn strategic ambition into measurable value.

What you can answer

  • Which companies are improving versus plateauing in sustainability ambition and management quality?

  • Where are the gaps between ambition and actual operational integration?

  • Which companies require intensive engagement versus light-touch monitoring?

  • How should engagement resources be allocated across the portfolio?

Outcome / solutions

  • Portfolio-wide heatmaps showing ambition and management quality.

  • Prioritization of engagement focus: which companies to work closely with.

  • Actionable engagement integration plan aligned to management’s actual maturity.

  • Integration of KPIs into board and management incentive schemes.

  • Regular monitoring dashboards to demonstrate progress to LPs or regulators.

Intention
Create a demonstrable, investment-grade sustainability story for buyers and shorten sales processes.

What you can answer

  • Has the company’s sustainability ambition and management quality improved over the holding period?

  • Can we substantiate claims with consistent, comparable evidence?

  • How does the company compare to competitors in sustainability strategy maturity?

  • Which achievements will resonate most with prospective buyers?

Outcome / solutions

  • Exit readiness report with trajectory over time and benchmarking against peers.

  • Documented evidence to include in the information memorandum or data room.

  • Clear sustainability story that differentiates the asset in the market.

  • Ability to demonstrate how improvements contribute to valuation uplift.

Intention: Optimize portfolio performance across both financial and sustainability metrics

Challenge: Continuously monitoring and improving the sustainability profile of diverse investments

Solutions:

  • Align your portfolios with your sustainability investment objectives (risk, return, impacts)
  • Inform engagement strategies with portfolio companies
  • Use our engagement strategy tools to guide interactions with portfolio companies
  • Leverage our Tools to track sustainability performance across your investments
  • Use the approach to define exit strategies and prepare sell-side Due Diligence reports

Intention: Provide transparent, comprehensive reporting on portfolio sustainability strategy focus (risk, return, impacts)

Challenge: Aggregating and presenting complex sustainability data from multiple investments

Solutions:

  • Utilize the stress test results to compile sustainability strategy information across your portfolio
  • Use our benchmarking tools to contextualize your portfolio’s strategy against competition and industry average performance
Want to learn more about the use cases for your situation? 

How the ambition levels are assessed

PI’s Strategy Framework

We assess three dimensions across 20 criteria and 40 management questions to determine an organisation’s Ambition Level and Management Quality. This produces the four core outputs investors use to compare companies and shape investment decisions.

What we assess

The framework maps a company to one of five Strategic Ambition Levels (from Legal/Stakeholder Compliance to Sustainability-Driven). This shows how deeply sustainability is embedded in strategy and whether it is likely to generate competitive advantage.

Measures the consistency and operational embedding of commitments. High ambition with low management quality = engagement focus or value-at-risk. Low ambition with high management quality = deliberate strategy choice.

Assess disclosure quality and detect “Only PR” risks (greenwashing). Use these to triage diligence effort and to set remediation priorities.

Compare dozens of companies on the same metrics so you can: prioritize engagement, reweight exposures, stress test aggregated portfolio risk, or identify (potential) high sustainability value creators.

The five ambition levels of the Strategy Framework are built on insights from 36 leading sustainability standards, and reflect the degree to which sustainability is embedded into the organization.

How the results indicate financial returns

Our research on major German stock-listed firms reveals a spectrum of sustainability strategies, each with distinct financial implications:

  • Applying an “Only PR” approach or remaining at Legal/Stakeholder Compliance often correlates with financial disadvantages (reactive posture)
  • By contrast, Pragmatic and Strategic levels—implemented consistently—are more likely to yield advantages

Some B2C leaders at the Sustainability-Driven level have reported 15–40% annual revenue growth. See, e.g., Patagonia and Tony’s Chocolonely.

As ambition levels increase, so do investment requirements. The key question is: Which strategy best suits your investments, and is your management aligned with this goal?

PI’s research has shown that Only PR approaches that can be identified by a low consistency as well as low strategic ambitions lead to a financial underperformance, highly consistent and higher strategic ambitions, on the contrary, lead to a financial overperformance. PI Impact Accounting Framework, Impact Accounting Standard PI Value & Risk Framework, PI Strategy Framework PI Rahmenwerk zur Wirkungsbilanzierung, PI Wert & Risiko Rahmenwerk, PI Strategie Rahmenwerk
Interested? Read more in our study series

The added value for investors

The PI Strategy Framework helps you:

  • Determine which strategic ambition levels are realistic and relevant for your investments.

  • Evaluate the financial return and business impact of each sustainability ambition level.

  • Benchmark your portfolio against industry peers and best practices.

  • Select the ambition level that best supports your investment’s mid- and long-term value creation.

  • Identify misalignments or missed opportunities (gaps & overshoots)  across your current investments.

  • Align sustainability efforts with the overall goals of your investment firm to drive consistency and effectiveness.

  • Enhance communication and reporting by moving beyond surface-level PR to meaningful sustainability action.

PI Impact Accounting Framework, Impact Accounting Standard PI Value & Risk Framework, PI Strategy Framework PI Rahmenwerk zur Wirkungsbilanzierung, PI Wert & Risiko Rahmenwerk, PI Strategie Rahmenwerk

Each ambition level has a specific purpose, backed by real data and insights into how sustainability aligns with business operations. The framework is scientifically tested to ensure that sustainability efforts generate real financial and strategic benefits.

What to do with the results

What comes next

Once you’ve assessed your sustainability strategy, the next step is to act on it.

We’ve developed a flexible, evidence-based process to help you move from insight to integration – tailored to your ambition level, your sector, and your current position. Not every step is needed for every investment stage, and the order can vary depending on where you are in your journey.

1. Impact Assessment – Level 1

Start with a high-legel, data-driven assessment of the portfolio’s sustainability impacts. This helps identify where your activities create value, or risk, for society and the environment.

2. Strategy & peer benchmark

Evaluate your current Ambition Level and compare it to peers. Ideally, your Impacts are also evaluated, helping you understand your relative position.

3. Strategy kick-off workshop 

Bring leadership on board. In this session, we align on ambition levels and potential strategic direction: setting the tone for whats to come. 

4. Impact Assessment – Level 2

Dive deeper into your most material impacts. This level includes more granular data and analysis, tailored to your sector and business model.

5. Financial effects, risks & opportunities

Using PI’s Financial Effects Database, we assess how sustainability impacts translate into financial risks and opportunities: both for your returns and for society.

6. Materiality Assessment
Define what matters most. We help you assess double materiality – the impact of sustainability on your investments, and your investments on society

7. Evaluation of measures

Identify and evaluate concrete measures: both to improve impact and to manage financial risks. This includes scenario analysis and cost-benefit evaluation.

8. Strategy Workshop
Discuss the results, explore strategic options, and make decisions. This is where ambition becomes action.

9. Integration into investments

Translate your strategy into policies, processes, and controls. This includes governance, risk management, and operational integration.

10. Reporting & communication
Ensure internal and external stakeholders understand your strategy. We support you in aligning your reporting, equity story, and ESG ratings.

Materiality & Strategy

From materiality to strategy – turning insights into action

Materiality assessments form the backbone of any sustainability strategy and governance. We combine quantitative impact analysis with stakeholder and expert insights to determine both your organization’s impacts on society and the environment and the financial relevance of these impacts. This ensures a clear view of how sustainability topics shape your financial performance.

  • Impact Materiality – Quantify your organization’s positive and negative impacts on society and the environment
  • Financial Materiality – Identify how sustainability topics influence financial performance
  • Strategic Alignment – Determine the Strategic Ambition Level that best matches your risks and opportunities
  • Consistent Management & Reporting – Align materiality, management, and reporting to your strategic ambition, ensuring compliance and credibility
PI’s approach on how to influence the strategy design by structurally using the double materiality assessment in order to identify the risk & opportunity profile of the organization which then determines the strategic options to best choose from. Showing the PI Frameworks on Impact Accounting, Value & Risk, and Strategy in one go PI Impact Accounting Framework, Impact Accounting Standard PI Value & Risk Framework, PI Strategy Framework PI Rahmenwerk zur Wirkungsbilanzierung, PI Wert & Risiko Rahmenwerk, PI Strategie Rahmenwerk
Our fact-based double materiality matrix shows how we can apply our science-based thresholds onto any impact materiality scale, giving you clear objective results on your impact material topics (C and A) as well as a fact-based process to determine your financial material topics (A and B). PI Impact Accounting Framework, Impact Accounting Standard PI Value & Risk Framework, PI Strategy Framework PI Rahmenwerk zur Wirkungsbilanzierung, PI Wert & Risiko Rahmenwerk, PI Strategie Rahmenwerk
The aggregated view of PI’s Materiality Matrix presents the outcomes of a detailed materiality assessment in up to three dimensions. PI Impact Accounting Framework, Impact Accounting Standard PI Value & Risk Framework, PI Strategy Framework PI Rahmenwerk zur Wirkungsbilanzierung, PI Wert & Risiko Rahmenwerk, PI Strategie Rahmenwerk
The example shows how our fact-based impact materiality assessment can turn perception upside-down, saving you money, avoiding over- or under-estimating risks and opportunities. PI Impact Accounting Framework, Impact Accounting Standard PI Value & Risk Framework, PI Strategy Framework PI Rahmenwerk zur Wirkungsbilanzierung, PI Wert & Risiko Rahmenwerk, PI Strategie Rahmenwerk
The assessment of financial materiality typically also contains the change in relevance over time, also referred to as dynamic materiality. PI Impact Accounting Framework, Impact Accounting Standard PI Value & Risk Framework, PI Strategy Framework PI Rahmenwerk zur Wirkungsbilanzierung, PI Wert & Risiko Rahmenwerk, PI Strategie Rahmenwerk

Our methodology includes:

  • Scoring on a scale that you choose, where for impact materiality we map our science-based thresholds for climate, water, nature, and social topics to your chosen cut-off and help you translate the risk appetite of your CFO to the cut-off for financial materiality
  • Integration of stakeholder perception and expert input
  • Support in choosing the materiality definition that best suits your impacts, risks, and opportunity (IRO) profile and chosen sustainability strategy
  • Tailored approach that best fits the maturity of your materiality processes
  • Alignment with CSRD’s double and IFRS’s single materiality requirements

This ensures that your materiality assessment is not just compliant (if relevant), but meaningful. It helps you prioritize actions, allocate resources, and communicate with confidence.

Under CSRD, not only missing out material impacts, but also the reporting on non-material topics is non-compliant. We help you get it right – what to focus on – and go beyond.