Connecting Your Investments to the Sustainable Development Goals (SDGs)
The 17 Sustainable Development Goals (SDGs) were established by the United Nations in 2015 to create an interrelated set of targets that nations can manage to achieve sustainability and development objectives that protect the planet and benefit humanity. The SDGs are an expansion of the MDGs (Millennium Development Goals) which proceeded it. The 17 SDGs target poverty, hunger, health, education, climate change, gender equality, water, sanitation, energy, environment and social justice.
The UN Resolution containing the SDGs was made amongst nations but companies are participants in sustainability. Over the years, corporations have designed their approach to sustainability through an external stakeholder lens driven by the agendas of NGO and activist investors. With the SDGs, companies can take a position on global sustainability and use its structure to align their corporate social responsibility strategy with those Goals. Despite being written from a sovereign perspective, there are both implicit and explicit calls to citizens, NGOs, not-for-profits, educational institutions, the scientific community, and corporations to exist in conscience with these Goals.
Subsequently, corporations have since looked acutely at the SDGs for ways to align their corporate reporting and sustainability strategy. But this does not come without challenges, in part because the SDGs are global and somewhat aspirational in nature. Corporations like Praxair, Inc. were early adopters of an SDG inspired approach (Praxair Announces Its Sustainable Development Goals (SDGs).) Still the challenges appear to have become more real of late with a downward trend in the number of organizations saying that they are “aware of the SDGs, but have no plans to do anything about them” (Corporate Action on SDGs Stalling Just Two Years Into 2030 Agenda.)
The SDGs have also caught the attention of the investors. Asset owners including investing groups and individuals may wish to connect their investments to specific SDGs. Investing inline with a specific SDG transcends investing in companies with only high ESG scores. And it narrows the investment selection to related sectors and specific indicators concerned with that Sustainable Development Goal.
To select the appropriate companies, an ESG analyst will look for indicators that impact the Goal’s outcomes. For example, SDG Goal 14 is “Conserve and sustainably use the oceans, seas and marine resources for sustainable development.” So an analyst will evaluate broadly which ESG indicators have a positive or negative impact on the conservation and sustainability of the oceans, seas and marine life. These indicators can come in a few forms: metrics, reports and disclosures, or SDG involvement.
Metrics are numbers that can be used to mathematically rank companies by impact measurements. These measurements can be further mathematized to create new metrics, for example dividing emissions totals by revenues.
Reports and disclosures include both regularity reports and voluntary disclosures. These often reveal a company’s policy on sustainability issues or its internal methods for monitoring or mitigating its impact on the Goal.
Active support and involvement in advancing the goal can is another indicator and can come in the form of championing the communication of knowledge about the SDG, being a proponent of it, or providing financial support for organizations endorsing the Goal’s success.
The SDGs are a different way for companies and investors to address broad or specific areas of global sustainability and human values. They are also creating a roadmap for sustainability reporting for companies worldwide.
Gregg Sgambati is Head of ESG Solutions at S-Network Global Indexes, Inc.