SI Dilemma: Is 'good enough' good enough in sustainability?

The UN environment programme describes sustainable living as “understanding how our lifestyle choices impact the world around us and finding ways for everyone to live better and lighter”. We cannot avoid consuming natural resources; we need them to meet our basic needs for food, health, housing and living in today’s society.

However, we can try to reduce the load we place on nature by changing our diets to more plant-based foods, taking the train instead of a car or plane, and reducing personal waste. Most people try to behave more sustainably but accept that sometimes they will take a flight, or eat meat.

In a perfect world, we might all try to emulate Greta Thunberg and cut out everything ‘bad’ from our lifestyles. In reality, this can be exhausting, and potentially undermine the longer-term goal. Making incremental changes and sustaining a lower-impact lifestyle over the long term could ultimately make more of a difference.

How we behave as a corporation can have a much greater impact than individuals. For asset managers focused on sustainable investing, there is also a reputational issue in question – how do we live up to the standards that we expect of the companies we invest in?

At Robeco, we take this seriously with, for example, a net-zero climate commitment that aligns with our expectations of companies in our portfolio. But to achieve the goal of moving capital to more sustainable economic activities, we need to remain in business, and that means staying competitive.

So, how much business travel is acceptable to ensure we stay in touch with our clients and meet prospects? Should we only accept clients that want to invest sustainably? The response to these questions could impact the future growth and profitability of an organization, and even be existential for some companies.

Unfortunately there is no universal right answer. What works for one company, or in one region, or in one sector, may not work in another.

We have to make decisions about where to invest. The core purpose of an asset manager is to protect the capital of clients – so not investing is not an option. However, all companies – just like all people – consume natural resources and leave some footprint on the environment.

A totally sustainable company simply doesn’t exist. Evaluating how much negative impact is an acceptable trade-off can be a tricky value judgment, but is absolutely necessary in sustainable investing. In rare cases it can be simple – if the impact of a company’s products is negative for sustainable development, such as the much-maligned tobacco sector, then no amount of positive impact to counter it would be deemed as acceptable.

Usually the trade-off is more complex though. For example, is a health care company producing life-saving drugs that are tested on animals having a positive or a negative impact? Different people might have a different opinion, and there might be other issues to consider to come to a conclusion on whether a company causing the least harm possible, or could do better.

At Robeco, we experience this challenge in constructing the methodology behind our SDG framework. We focus on the products and services that companies offer to determine the primary impacts that a company has on the Sustainable Development Goals. But we also look at how they operate, and sometimes how those products are used, and the discussions around methodology and scoring always trigger extensive debate, even between well-informed professionals.