Portfolio Alignment
62%
Holdings within planetary safe zones
Boundary Breaches
5 / 9
Critical thresholds affecting assets
Scenario Risk
High
Systemic risk in ag, extractives, chemicals
Time Horizon
↓ 7.5 yrs
Compressed by boundary transgressions

From Diversification to Earth System Alignment

Planetary boundaries fundamentally reconfigure portfolio construction. Traditional diversification fails when biophysical thresholds are breached; risk becomes systemic, and value across sectors can collapse in tandem.

Boundary-Aligned Screening

Screening must move beyond generic ESG filters to threshold-specific exclusion and alignment. Exclude firms in overshoot zones, penalize high biosphere dependency, and integrate satellite telemetry and regional risk maps.

Strategic Asset Allocation

Recalibrate asset classes and sectors based on proximity to irreversible thresholds. Introduce biophysical concentration limits, and stress-test equity and fixed income for boundary-exposed revenue streams.

Planet-Positive Strategy

Invest in restoration and resilience: fund projects that restore boundary integrity (wetland recovery, regenerative ag, reforestation), and treat restoration as risk hedging.

Scenario Planning

Use integrated assessment models and scenario-adjusted value-at-risk to simulate capital impairment under boundary breach scenarios. Reorient strategy around system survival, not sector rotation.

Portfolio Alignment Gauge
Current portfolio: 62% aligned with planetary boundaries
Sector Exposure to Boundary Risk
Agriculture
92%
Extractives
81%
Chemicals
77%
Infrastructure
62%
Services
38%
ScenarioPortfolio DrawdownSector CorrelationTime Horizon
Base-14%Moderate10 yrs
Stress-37%High4.5 yrs
Restoration-7%Low14 yrs
How are planetary boundaries integrated into portfolio construction?
  • Asset-level screening by boundary status (satellite, regulatory, and telemetry data)
  • Sector weighting and allocation limits based on proximity to ecological thresholds
  • Scenario-adjusted discount rates and risk premiums for boundary-exposed assets
  • Dynamic rebalancing as new boundary data and regulatory signals emerge
How does scenario planning change investment strategy?
  • Integrated Assessment Models (IAMs) simulate economic and capital market impacts of single and compound boundary breaches
  • Restoration scenarios model risk reduction from ecosystem recovery investments
  • Stress scenarios compress time horizons and increase drawdown risk
Insights:
  • Traditional diversification fails under biophysical constraint; systemic risk is now non-diversifiable across boundary-exposed sectors.
  • Portfolio resilience depends on Earth system alignment, not just financial optimization.
  • Scenario planning and restoration investment are critical for long-term solvency and risk mitigation.
  • Advanced screening, scenario-adjusted risk modeling, and dynamic allocation are essential for future-proof portfolios.

Planetary Boundaries in Financial Strategy and Portfolio Construction