japanjp
How to quantify a company’s contribution to the UN SDGs?

How to quantify a company’s contribution to the UN SDGs?

11-05-2018 | インサイト

Earning a good return and contributing to the Sustainable Development Goals at the same time? Building a strategy that does just that, has turned out to be a challenge. The main difficulty is to quantify a company’s contribution to the SDGs. RobecoSAM is now one of the first to solve the puzzle, developing an SDG framework that scores companies on their contribution to the SDGs. It will be used in the Global SDG Credits strategy that will be launched in mid-May.

  • Taeke  Wiersma
    Taeke
    Wiersma
    Co-head Credit Research
  • Jacob  Messina, CFA
    Jacob
    Messina, CFA
    Head of Sustainability Investing Research, RobecoSAM

Speed read

  • RobecoSAM has developed a proprietary SDG framework 
  • We can rate companies’ impact on the UN SDGs
  • The SDG ratings can be used to build a global SDG credit strategy

The UN Sustainable Development Goals (SDGs)

Ever since the United Nations defined its Sustainable Development Goals (SDGs) in 2015, investors have become increasingly interested in investments that contribute to the realization of these goals and provide a good return. The 17 goals, which should be achieved by 2030, target a broad range of topics such as the availability of water and sanitation for all, food security, achieving gender equality, and access to affordable and sustainable energy.

クレジットに関する最新の「インサイト」を読む
クレジットに関する最新の「インサイト」を読む
配信登録

Figure 1 | The UN Sustainable Development Goals

The challenge: measuring an investment’s impact on the SDGs

It is easy to imagine that, for example, a solar company has a positive impact on the goals, and an oil company a negative one. The challenge, however, is to properly evaluate and quantify the contribution of all companies in an investment universe when building a targeted SDG strategy. This requires a framework, with clear, objective and consistent rules.

RobecoSAM is one of the first asset managers to meet this challenge by developing a proprietary SDG framework. This consists of taking a three-step approach. Robeco’s Credit team will uses this framework for the Global SDG Credits strategy that will be launched in May. We will briefly explain the three steps.

Step 1: What does the company produce?

In step 1 we link companies’ products and services to the SDGs. To what extent do they contribute? Companies are assessed on an extensive set of rules and Key Performance Indicators (KPIs). These are summarized in a guidebook. The guidebook states whether the contribution of these products and services is positive, neutral or negative.

Figure 2 | Example of the SDG guidebook

For the telecom sector, for example, the starting point is positive. Telecommunications are an essential part of the infrastructure in a safe and connected society. Farmers can use mobile phones to check market prices before selling to middlemen, and market traders can accept payments in mobile money. This way, the telecom sector can contribute to a proper infrastructure (SDG 9), economic growth (SDG 8) and ultimately to the reduction of poverty (SDG 1).

We then determine the extent of the contribution, which in the case of telecom we deem low. Subsequently, we then dig deeper by looking at the individual companies within this sector and how they score on a set of KPIs. If, for example, more than 25% of the telecom company’s sales take place in emerging markets (which have most to gain from a good telecom network, as e.g. mobile payments can provide large numbers of unbanked with bank accounts), we upgrade the impact from positive-low to positive-medium. See figure 2 for an illustration of the KPIs used.

Step 2: How does the company operate?
SDGs are also about how companies operate themselves. Are they polluting, do they respect labor rights, do they refrain from corruption? In step 2, the credit analysts check if the way the firm operates is compatible with the SDGs. If necessary, the SDG ratings can be adjusted.

Step 3: Are controversies known?
In the final step, we check whether the company concerned has been involved in any controversies, such as oil spills, fraud or bribery. This step can lead to adjustments in the rating. If firms commit serious and structural breaches of the UN Global Compact, they are excluded.

The outcome of this three-step analysis is quantified with an SDG score. This is shown in Table 1.

Table 1 | SDG rating methodology

Source: Robeco, RobecoSAM

The good and the bad

Robeco’s credit analysts and RobecoSAM’s SI analysts have done a mapping exercise of some 450 companies. 62% of the companies have been assessed as making a positive contribution, such as grid operators, healthcare companies, banks (by providing finance, especially in emerging markets, banks play an important role in fostering innovation and stimulating economic growth) and utilities with a relatively small share of coal, nuclear energy and oil in the energy generation mix.

26% of the companies analyzed make a negative contribution. Examples are energy producers with a relatively large share of fracking, companies that produce unhealthy food, or car manufacturers with a low share of EV/hybrid models.

Conclusion

Assessing a company’s contribution to the SDGs is a challenge. However, we have found a way by applying the RobecoSAM SDG framework, which quantifies the contributions that a company’s products and services make to the SDGs. Results of our analysis indicate that sectors with a weaker SDG profile include the energy, car manufacturers and food & beverage sectors. However, we have also found that there are more than sufficient issuers to create a well-diversified global credit portfolio with a positive impact on the SDGs.

重要事項

当資料は情報提供を目的として、Robeco Institutional Asset Management B.V.が作成した英文資料、もしくはその英文資料をロベコ・ジャパン株式会社が翻訳したものです。資料中の個別の金融商品の売買の勧誘や推奨等を目的とするものではありません。記載された情報は十分信頼できるものであると考えておりますが、その正確性、完全性を保証するものではありません。意見や見通しはあくまで作成日における弊社の判断に基づくものであり、今後予告なしに変更されることがあります。運用状況、市場動向、意見等は、過去の一時点あるいは過去の一定期間についてのものであり、過去の実績は将来の運用成果を保証または示唆するものではありません。また、記載された投資方針・戦略等は全ての投資家の皆様に適合するとは限りません。当資料は法律、税務、会計面での助言の提供を意図するものではありません。

ご契約に際しては、必要に応じ専門家にご相談の上、最終的なご判断はお客様ご自身でなさるようお願い致します。

運用を行う資産の評価額は、組入有価証券等の価格、金融市場の相場や金利等の変動、及び組入有価証券の発行体の財務状況による信用力等の影響を受けて変動します。また、外貨建資産に投資する場合は為替変動の影響も受けます。運用によって生じた損益は、全て投資家の皆様に帰属します。したがって投資元本や一定の運用成果が保証されているものではなく、投資元本を上回る損失を被ることがあります。弊社が行う金融商品取引業に係る手数料または報酬は、締結される契約の種類や契約資産額により異なるため、当資料において記載せず別途ご提示させて頂く場合があります。具体的な手数料または報酬の金額・計算方法につきましては弊社担当者へお問合せください。

当資料及び記載されている情報、商品に関する権利は弊社に帰属します。したがって、弊社の書面による同意なくしてその全部もしくは一部を複製またはその他の方法で配布することはご遠慮ください。

商号等: ロベコ・ジャパン株式会社  金融商品取引業者 関東財務局長(金商)第2780号

加入協会: 一般社団法人 日本投資顧問業協会