We see global sustainability trends such as climate change, water scarcity and public health as important drivers that can create longterm growth opportunities for those companies that are able to provide solutions. The SDGs have provided further clarity on how to identify and track these opportunities in a structured way.
In 2016, the starting point for our analysis was to look at how the companies within our portfolios mapped against each of the 17 SDGs.
While this gave us a useful starting point, the high-level mapping against the 17 goals was not granular enough to provide sufficient insight into our portfolio holdings. We extended our analysis by going to a deeper level in 2018 and considering the underlying SDG targets.
We analyzed the individual revenue streams of portfolio holdings and identified whether the products and services in those business segments have links to SDG targets, and if so, which ones.
When aggregating the data, we use the weighting of the holding within the portfolio, to determine not only the number of companies with a link, but also the value of the portfolio’s assets with links.
One company, depending on its breakdown by business segment, may have links to more than one goal and/or target; another company may have a business segment that is linked, and one that isn’t. Through this analysis we have achieved a much deeper understanding of where the exposure lies, both to business areas that support the sustainable development agenda, and to areas that are not so aligned. We developed an in-house methodology to do this, considering existing investor resources¹ but using our own interpretation of the many borderline cases that arose.
We are in the process of applying this approach to a range of our specialist ESG funds, including Responsible Global Emerging Markets and Responsible Global Equity.²
The result of this analysis for one of our strategies, Responsible Global Equity, is summarized on page 4.³ This shows the strongest connections being with SDG 8 – Decent Work and Economic Growth, which links to finance and services companies; SDG 3 – Good Health and Well-being, which includes healthcare holdings; and SDG 9 – Industry, Innovation and Infrastructure, which has links to firms in sectors such as industrials and chemicals providing solutions to improve energy efficiency.