A collaborative effort to optimize the impact of SDG Investing
Sustainable Investing Open Access Initiative
Investors are embracing the SDGs. But effectively investing in SDGs needs a common unified approach. As a first step Robeco is launching an open access platform to share its SDG Framework, promote and encourage research and ideas, and offer free insight into individual company SDG scores. In this way, stakeholders can optimize the impact of these investments.
What are the SDGs?
In 2015 the United Nations adopted the 17 Sustainable Development Goals (SDGs). For the first time in history, the world has a shared plan for promoting sustainable economic growth, advancing social inclusion, and safeguarding the natural environment. All countries have agreed to work towards achieving the 17 SDGs by 2030.
The ‘call to action’ that lies at the heart of the 17 goals is aimed at the whole of society. It presents both a challenge and an opportunity, for businesses and investors, both of whom are seen as key to achieving the goals.
Why are they relevant to Investors?
SDG Investing is about impact investing. This differs from ESG integration, which focuses on avoiding financial risks that stem from poor performance on environmental, social and governance issues. SDG scores can identify which companies are expected to have significant negative impact and which ones can or will provide sustainable solutions.
1. Investors indicate that they want to align their investments with the SDG goals, now and in the future, with 18% saying they had made it a high priority. A further 40% said they would consider doing so over the next two to three years.
2. SDG Investing lets investors zoom in on their own goals. With 17 SDGs to choose from, there’s no shortage of issues that an investor can use to zoom in on their own ambitions, allowing them to direct and manage exposure to their chosen SDGs. This has helped make sustainable investing something specific and measurable.
3. Achieving the goals leads to massive business opportunities as it means investing in the companies whose products and services can progress them, from making telecoms accessible in remote areas to rolling out healthcare and education facilities to a wider populace. Some companies and sectors are naturally more attuned to contributing to the SDGs than others, which in turn has directed investment flows.
4. We can identify how companies contribute to the SDGs when they make products or offer services that help achieve one or more of the 17 goals. Some business by their nature contribute to particular SDGs, while others may be better placed to contribute to a whole theme or bucket, such as meeting basic needs
All in all, the SDGs provide a framework to define a sustainable philosophy and priorities at a corporate level, track progress over time, and use a consistent reporting methodology that can be applied across the majority of asset classes.
The importance of a common SDG framework
Sustainable investing takes place in a scattered environment with a lot of different legislation, definitions, areas and interpretations. As a result, effectively incorporating sustainability is complex and requires all stakeholders in the value chain to be involved. Using common frameworks drives understanding and effectiveness as well as providing insight into the impact across society. This goes for SDG Investing as well. There are multiple ways in which to invest in the SDGs, and frameworks available for this purpose. The most important feature a framework must possess for use as an investment tool is accuracy.
Robeco SDG Framework
To this end, Robeco has created a proprietary SDG Framework: a robust tool that systematically evaluates companies based on their performance across key SDG-related targets. A company’s overall performance across the most strategically relevant SDGs aggregates into an overall company SDG score. The resulting SDG scores are used to construct portfolios that pursue positive impact and avoid negative impact, thereby advancing sustainable progress in the economy, society and the natural environment.
Open access framework to make it better together
We are now opening up our SDG Framework and scores to all stakeholders interested in SDG investing in order to improve the framework going forward. Offering the scores and framework to academics, investors and SI experts for further research, we are also actively asking for feedback and enhancements – using all knowledge and insights to make the framework even better, so that it can truly be a common unified basis for SDG Investing.
We expect that collaboration via the open access framework will encourage a much deeper grasp of the SDGs, help the investor community understand the risks and opportunities involved, and enable an optimized approach to impact investing. Opening up our SDG scoring system is the first step. At a later stage, Robeco may also make other SI data available.”
Supporters of the initiative
The SDG framework is used for many of Robeco’s client portfolios. These include some of the world’s biggest asset owners like UBS Global Wealth Management, BBVA AM, Standard Chartered Bank and pensioenfonds ING, who are all keen supporters of Robeco’s SI Open Access initiative.
“We support the launch of Robeco’s Sustainable Investing Open Access Initiative. We share a common belief and understanding that we should be heading towards a more sustainable world. Good quality data, which is transparent and consistent , is important to us in our investment decisions. We believe that the decision of Robeco to create an open access platform shows forward thinking and leadership in sustainable investment.” Stichting Pensioenfonds ING