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The Sustainable Development Goals

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The Sustainable Development Goals

The issues for responsible investors

We are seeing market excitement and some interest from clients around the concept of integrating the UN Sustainable Development Goals (SDGs) into portfolio construction as a framework for assessing ‘impact’. This Expert Briefing responds to that client interest, explores the issue more deeply, and sets out our response and current position.

The 17 Sustainable Development Goals, successor to the Millennium Development Goals, were devised by the UN, and agreed in 2015. The Goals are underpinned by 169 targets and are an agenda for the world up to the year 2030. These Goals apply universally to all nations, to mobilize efforts to end poverty, fight inequality and tackle climate change.The Goals require a revitalised partnership between agencies and Government for ‘people, planet and prosperity’, but are not primarily built for business or investors.

The responsible investment market is vibrant and changing. Products now encompass multiple strategies from ‘ethical’ to ESG (environment, social and governance) risk integration. Thematic funds seek to specialise in ‘solutions’ based stock picking, focused typically on water, energy and waste. Another approach that is receiving considerable attention is ‘sustainability’. Definitions vary, but this approach typically looks at solutions based approaches that are utilising the SDGs. Various new product launches in the UK and Europe claim to ‘integrate’ the SDGs to make investments contribute positively to selected SDGs via the goods and services they produce. Some go further by attempting to measure ‘impact’.

What has been EdenTree's response?

Our entire responsible investment offering to clients is built on trust and integrity. For 30 years, we have sought to fully integrate ethical and responsible business practices into stock selection to deliver ‘Profit with Principles’. Our response has been to conduct intense due diligence to look at the viability of ‘SDG integration’ and the concept of ‘impact’.

We have met five service providers that are developing tools for investors to integrate or map the SDGs across portfolios. These models are in various stages of development but they currently share some similar drawbacks: 

  • There is little consistent reporting by companies to allow an informed SDG integration process to take place;
  • The tools we have seen are modelled largely on assumptions rather than quantified, published data;
  • All tools apply different methodologies and come to different conclusions, which may compromise the integrity of outcomes.

The EdenTree Amity Panel, which has independent oversight of our Amity process, has provided advice on our findings and agrees that, at least at present, using an experimental model to integrate the SDGs would not add value for clients. They pointed to our nine pillars as robust and transparent, and which already cover relevant SDGs.

We understand the interest from clients in seeking to measure impact via integrating the SDGs. However we currently believe this is not possible under current reporting regimes. We will monitor developments and continue to engage with service providers as tools mature and data allows the reliance on assumptions to be reduced. 

We will begin to reference the SDGs in our Amity Insights and in our thought leadership. For instance our Insight ‘Hungry Planet Revisited’ is a thematic response to SDG2 (No Hunger), our Insight, ‘Sustainable Cities’ a response to SDG11 (Sustainable Cities and Communities), and Thirsty Planet Revisited, a response to SDG6 (Clean Water and Sanitation). Our Expert Briefs that look at particular stocks will increasingly reference their reported contribution to meeting the SDGs, where appropriate.

Our quarterly Global Corporate Governance reports reference SDG16, Peace, Justice and Strong Institutions, which is a commitment to ‘develop effective, accountable and transparent institutions at all levels’. We believe that our Stewardship on behalf of clients is a contribution towards strong institutions. 

For 30 years our robust process has sought to offer clients Profits with Principles. We strive to integrate the principles of ethical and responsible investment in a way that has deep integrity. We are not the followers of fashion, but leaders striving constantly to innovate. In many ways the 17 SDGs are an eloquent articulation of the issues we look at and the concerns we have followed for many years. The way we manage funds and communicate to clients place the priorities of the SDGs at the very heart of what we do. 

 
 

The value of an investment can fall as well as rise as a result of market and currency fluctuations, you may not get back the amount originally invested. Past performance should not be seen as a guide to future performance. If you are unsure which investment is most suited to you, the advice of a qualified financial adviser should be sought. EdenTree Investment Management Limited (EdenTree) Reg. No. 2519319. Registered in England at Beaufort House, Brunswick Road, Gloucester, GL1 1JZ, UK. EdenTree is authorised and regulated by the Financial Conduct Authority and is a member of the Investment Association.