Dual materiality:
biodiversity and real estate
The CSRD mandates a simultaneous assessment of the company's impact on biodiversity and the impact of biodiversity on the company. For real estate, this dual approach reveals concrete financial risks and opportunities for value creation.
The principle of dual materiality
Unlike previous reporting frameworks (NFRD, optional GRI), the CSRD mandates a two-pronged . The company must assess:
- Inside-out Materiality of Impact — how my activity affects biodiversity. Which ecosystems are degraded, which species are disturbed, which ecological continuities are disrupted by my operations.
- Outside-in Financial Materiality — how biodiversity affects my economic viability. What financial risks arise from dependence on ecosystem services, and what opportunities emerge from preserved biodiversity.
The ESRS 1 standard (general requirements) specifies that an issue is material if it is material along at least one of two axes. For biodiversity in real estate, both axes are almost always material: construction affects biodiversity (impact), and the degradation of biodiversity affects the viability of assets (financial risk).
Materiality of impact: what real estate does to biodiversity
Real estate is one of the sectors with the most documented direct impact on biodiversity. The main pressures identified by ESRS E4 and the IPBES framework are:
Soil artificialization
The leading direct cause of biodiversity loss in France. Every real estate development converts natural or agricultural land into paved surfaces. The Climate and Resilience Law (ZAN) aims to halve the rate of land development by 2031 and achieve net zero land take by 2050.
Habitat fragmentation
Built infrastructure and roads create physical barriers that disrupt ecological corridors (green, blue, and black corridors). The BPS Design Phase specifically assesses the maintenance or restoration of these corridors.
Light and noise pollution
Nighttime lighting and noise pollution disrupt biological cycles (migration, reproduction, feeding). The BPS "dark network" criteria measure how these pressures are taken into account in the design.
Introduction of invasive species
Landscaping projects can introduce invasive plant species that degrade local ecosystems. The choice of plant palettes is a criterion of the BPS (Basic Planning Scheme).
For each real estate transaction, the BPS quantifies these impacts through its 70+ criteria (Initial State and Design). The results directly feed into the E4-4 data points (impact indicators) required by the CSRD.
Financial materiality: what biodiversity does to real estate
This is the least intuitive aspect, but often the most decisive for finance departments and investors. Biodiversity loss generates concrete financial risks for real estate assets:
| Risk | Mechanism | Financial impact |
|---|---|---|
| Heat island | Loss of vegetation → summer overheating | Increased costs (air conditioning), decreased attractiveness, depreciation |
| Flood | Impermeable surfaces → loss of soil absorption capacity | Property damage, increased insurance premiums, uninsurability |
| Regulation | ZAN, Directive 2024/825, Natura 2000, Water Law | Building permit blockages, penalties, litigation |
| Reputation | Unverified biodiversity claim | Greenwashing post-2024/2025, damage to image, loss of customers |
| Walk | Assets without biodiversity data are excluded from SFDR funds 8/9 | Reduced pool of investors, discount on resale |
These risks are no longer hypothetical. Listed real estate companies that have been publishing under CSRD since 2025 are finding that ESG analysts and institutional investors are demanding biodiversity data per asset , not consolidated corporate-level statements.
The BPS produces the dependency indicators expected by E4-5 and the data necessary for the EU Taxonomy's DNSH biodiversity analysis. Asset scoring allows real estate companies to consolidate at the portfolio level while maintaining the individual granularity required by auditors.
Conducting the dual materiality analysis of biodiversity
EFRAG recommends a structured, three-step approach to conducting dual materiality analysis on biodiversity. The BPS (Biodiversity Preservation Society) naturally fits into this process:
Identifying the issues
Map the pressures exerted (impacts) and ecosystem services consumed (dependencies) for each asset or operation. The Baseline State phase of the BPS produces this map.
Materiality assessment
Quantifying the severity of impacts (severity, extent, irreversibility) and the magnitude of financial risks (probability, magnitude). Numerical BPS scoring allows for this quantification on a reproducible scale.
Prioritization and reporting
Prioritize the material issues, define the data points to be published, and structure the E4-1 transition plan. The BPS results provide the factual basis for this strategic step.
Independence of the evaluation
Frequently Asked Questions
A dual materiality analysis is mandatory. If it concludes that biodiversity is material (which is almost always the case in real estate), full ESRS E4 reporting becomes required. Failure to conduct the analysis exposes the company to a risk of non-compliance.
The analysis is the responsibility of the company, generally led by the CSR department with the support of specialized consultants. The Business Performance Standard (BPS) provides the quantitative impact data that informs the impact materiality assessment. The financial evaluation requires a risk and opportunity analysis.
The TNFD (Taskforce on Nature-related Financial Disclosures) framework and CSRD dual materiality converge. The LEAP (Locate, Evaluate, Assess, Prepare) approach of TNFD structures the dependency and impact analysis, which directly feeds into both components of the ESRS E4 dual materiality assessment.
Dual climate materiality: the same exercise for ESRS E1
The dual materiality analysis is not limited to biodiversity (E4). ESRS E1 (climate) requires the same exercise: assessing the company's impacts on the climate (GHG emissions, including those from construction sites) and the risks that climate change poses to the company (physical and transition risks).
For the climate impact aspect of construction sites, Efficarbone provides the primary data. ESRS E1 and construction site carbon →
Dual materiality: biodiversity and climate
BPS for biodiversity impacts (E4), Efficarbone for construction site climate impacts (E1). Structure your dual materiality analysis on both aspects.