In 2015, members of the United Nations came to an agreement to pursue a worldwide sustainable development agenda for 2030. To help accomplish this, the member nations defined 17 Sustainable Development Goals (SDGs), covering topics ranging from healthcare, education and environmental protection, to equality. Furthermore, each SDG was assigned a sub-list of targets to help guide achievement of the Goals.

The UN also formed a global indicator framework (available here), which provides 232 metrics to quantify progress. These are to be reviewed annually by the UN, and will help to focus public and private investment in areas most urgently required to achieve sustainable development outcomes.

Institutional investors are increasingly looking to allocate funds in a way that has a positive environmental or social impact. The UN SDGs have been adopted by some of these investors as a useful framework to help guide these allocations, and they are asking their investment managers to report on their alignment to these Goals.

Not all SDGs are created equally 

When considering the SDGs, it is important to appreciate that they represent an intergovernmental agreement with a development focus, and as such, some are specifically designed with government action in mind. We believe it is important to differentiate these from the Goals to which the private sector may contribute.

One example is SDG 13, ‘Climate Action’. On the face of it, this sounds like a meaningful SDG for an environmentally focused investor. However, a detailed look at the specific targets within this Goal reveals that they include items such as climate policies at the national level, awareness-raising of climate adaptation and mitigation, and national climate finance targets. This focus on government action renders SDG 13 unsuitable for strong alignment to our listed equity strategies.

In contrast, SDG 9, ‘Industry, Innovation and Infrastructure’, is an example of a Goal that is much more relevant to the private sector. It targets mainly private investment. Companies that implement resource efficiencies in factory environments are one example of investment opportunities that align with this Goal.

Impax’s SDG mapping methodology 

In 2017, we identified the SDGs that are most relevant to the products, services, and long-term strategies of our investee companies. These consist of seven environmental SDGs, which we then mapped to the 29 FTSE Environmental Market sub-sectors (available here). Because each of our investee companies is classified under one of these sub-sectors, we only considered their primary activity when mapping.

Mapping is only the beginning 

Mapping investment strategies to SDGs is a good start, and certainly useful for asset owners seeking to align investments with global sustainable development objectives. However, this high level approach to impact reporting may lead to concerns of ‘greenwashing’ if not backed up with more detailed evidence of positive outcomes.

Impax’s recent report, ‘Impact @ Impax’, quantifies the environmental impact of two of our listed equity strategies: Specialists (a global portfolio focused on pure play, small- and mid-cap companies) and Leaders (a global portfolio of larger-cap companies). We continue to refine our impact reporting alongside emerging industry reporting frameworks, such as the SDGs, to assist clients in better understanding the outcomes of their investment choices.

Lisa Beauvilain

Head of Sustainability & ESG, Executive Director

Lisa is responsible for the development and oversight of Impax’s Sustainability and Environmental, Social and Governance (ESG) analysis, including overseeing stewardship work in the Listed Equity team. She is the Chair of Impax’s ESG, Sustainability Lens and Environmental Committees and also Co-Heads Impax’s impact investment work.

Lisa joined Impax in 2010. She started working in the financial industry in 1999 and previously worked as an executive director in the Investment Management Division of Goldman Sachs in London. Lisa has also worked as an independent consultant, focusing on environmental policy research and analysis.

She is active within working groups and advisory councils relating to impact investing, water, governance and ESG standard setting with several external industry organisations.

Lisa has an MSc in Environment and Development from the London School of Economics as well as an MSc in Finance from the Hanken School of Economics, Finland.

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