I think you would be wise to tend to your own affairs and not concern yourself overly much with how to "handle" the sad situations going on in your sister's family. There's nothing you can do. Say a prayer for all concerned. Then "Let go and let God." (as they say in Al-Anon.)

Only God above, in his omniscient understanding, knows for sure how much of the way your sister has lived has been totally her own choice. It would take divine insight to fully tease out what role compulsion plays in any person's behavior. That is what is meant by the saying, "Only God can judge." I don't know if there is a god, but I do know that it would take a divine mind to competently figure out just how much guilt should be assigned to any of us. Assigning guilt is not our responsibility. Your sister and your nephew and his former wife have all, undoutedly, failed miserably in handling life. Your grand-niece's sad story is the outcome. It's tragic. Leave it at that. Grieve for the heart-breaking sadness of it all. Be glad that you are not your sister.