Investors can Play a Central Role in Achieving the Sustainable Development Goals

Institutional investors across the world are ready to engage with and contribute to the Sustainable Development Goals, finds a report published today by ShareAction.

The researchers surveyed 52 institutional investors based in every region of the world with over £4trillion assets under management. The research found that:

• 95% of respondents plan to engage with investee companies about issues covered by the Goals
• 84% will allocate capital to investments supporting the Goals
• 89% will support regulatory reforms that promote the Goals

The 17 Sustainable Development Goals (SDGs), also known as the Global Goals, were adopted by 193 countries at a UN Summit in September 2015. The Goals cover social, environmental and economic targets for global development and tackle some of the most serious issues facing people and the planet.

The report, Transforming Our World Through Investment, finds that investors with a range of mandates are already supporting the Goals, and believe that taking action in support of the Goals is consistent with their investment objectives.

What do investors think of the Goals?

• 75% of respondents are already taking action which contributes to 3 or more Goals
• 65% of the investors surveyed said that supporting the SDGs is consistent with their fiduciary duty
• 62% said that doing so offers opportunities to increase investment returns.

Very few investors disagreed with these statements, but the research indicates that awareness of the Goals among many investors is not high and work is needed to ensure the framework of the Goals is seen as relevant by the world’s major institutional investors.

Action by investors to support Goals 8, 9 and 13 (promoting decent work and economic growth; building industry, innovation and infrastructure; and taking action to curb climate change) were considered by respondents to the survey to have the greatest potential to meet their long-term investment objectives.

Weak progress towards Goals 6 and 13, which are concerned with sustainable water management and combatting climate change, is associated with material risk for investors. The report gives evidence of how investors are taking action to mitigate these risks, through capital allocation and engagement with investee companies.

How are investors supporting the Goals?

Investors are already supporting various Goals in a number of ways. Respondents were most likely to be currently supporting:

• Goal 13 (action to combat climate change) – 78% of respondents reported currently taking action in this area
• Goal 5 (achieve gender equality and empower girls and women) – 70% taking action
• Goal 7 (ensure access to affordable, reliable, sustainable and modern energy) – 67% taking action

Most investors who responded do not yet frame activities which contribute to the Goals as such – a more common reference framework is environmental, social and governance, or ESG risks and impacts.

The report includes a number of case studies detailing how different investors are undertaking work which contributes to the achievement of the Goals. For example:

• Mirova is using the SDGs as the basis for its ESG analysis framework. The firm has developed a scoring methodology to determine companies’ impacts on the SDGs, which gives companies a sustainability ranking. Mirova’s funds then exclude those companies which have a negative impact, and increase allocations to those which have a positive impact.

• Alliance Trust Investments has also developed a framework to integrate the SDGs into its investment analysis. The firm has identified sustainable water management as a key theme, which is addressed by Goal 6 (‘Ensure availability and sustainable management of water and sanitation for all’). In 2015 the World Economic Forum labelled water availability as its ‘top global risk’ in terms of impact. Alliance Trust states: ““We believe that companies who are willing to be transparent on this issue and effectively manage a resource that is so vital to local communities, the natural environment and gross margins, are quite simply better investments.”

• Walden Asset Management has advocated for strong human rights policies within companies’ supply chains, to reduce inequality in how workers are treated, which supports Goal 10 (‘Reduce inequality within and among countries’). Since the launch of the SDGs, Walden Asset Management has written to a number of companies about the Goals, enquiring about actions they are taking to address Goal 1 (‘End poverty in all its forms everywhere’) and other Goals that address core issues related to extreme poverty.

• Pax World Investments, a US investment management company, has integrated diversity analysis and gender criteria into the research it produces for its funds. Its funds now favour investments in companies with diverse boards and also seek to avoid companies that do not provide a safe work environment for women. This supports Goal 9, which is to achieve gender equality.

Barriers

Barriers to investors supporting the Goals included a lack of information on companies’ social and environmental impacts and the wide-ranging nature of the Goals.

The report recommends the development of tools and frameworks for investors to link their investment objectives with the Goals, and action to improve company reporting. There is a significant role for investors themselves and investor organisations in fulfilling these recommendations. The report also finds that policy makers and civil society organisations with a commitment to the achievement of the Global Goals should support and engage the investment community to help advance the Goals. Partnerships between different actors will be crucial to driving meaningful action by institutional investors on this challenging long-term agenda.

Shadé Brown, Senior Sustainability Analyst at Calvert Investments, one of the investors surveyed, said:  “The Sustainable Development Goals are inspiring, ambitious and challenging. A better understanding of the investor-SDG landscape, barriers and ways to overcome them, as this report lays out, is important for investor efforts and the overall sustained and coordinated action necessary to achieve the goals of the SDGs.”

Catherine Howarth, Chief Executive of ShareAction said: “This research lends considerable support to the thesis that the Sustainable Development Goals are highly investment-relevant. Strong progress towards these Goals will drive GDP growth in many parts of the world. In a low returns environment, we are not surprised but we are pleased to see that institutional investors are engaged with these underlying drivers of business success.”

Jo Mountford, Responsible Investment Officer at ShareAction and one of the report’s authors said, “Our research indicates that investors are ready to engage with the Sustainable Development Goals, and indeed many are already doing so. We’re pleased to present strong examples of how investors are aligning their investment strategies to support the Goals, and making the most of the opportunities they present. From investing in accessible healthcare in emerging markets to promoting gender diversity in the boardroom, this report illustrates the many routes open to investors who wish to support the Global Goals.”