- The United Nations‘ 17 sustainability goals are of increasing importance for financial markets.
- They go further than classic sustainability criteria – with poorer countries slated to benefit.
- Specialist funds, such as DWS Invest SDG Global Equities, focus on companies that actively contribute to fulfilling the sustainability goals.
Seventeen ambitious goals and 15 years to reach them: just over five years ago on 25 September 2015, the United Nations (UN) adopted its Sustainable Development Goals (SDGs). Many heads of state and government from all over the world were there to witness the moment in person - among them German chancellor, Angela Merkel. When it was done - at 11:46 New York time - the delegates rose from their seats. They clapped and cheered.
The SDGs are an important milestone on the path to a better future for humanity and the environment. Representatives of the 193 states had struggled for more than two years to formulate them. The result was a catalogue of 17 sustainable development goals with 169 sub-points to be implemented by 2030. Humanity thereby committed itself, amongst other things, to eradicating poverty and hunger everywhere in the world and in all its forms. All people were to be guaranteed access to clean water and decent sanitation. All over the world, boys and girls were to receive free primary education. Women and girls were no longer to be discriminated against. Everyone was to have access to environmentally friendly energy.
Gigantic amounts of investment – millions of new jobs
These comprehensive goals cover almost all areas of life. At the same time, they are a powerful economic driver. According to the UN, there is a deficit of $2.5 to 3 trillion a year among developing countries alone to achieve them. The international community expects 380 million jobs to be created worldwide in a wide variety of sectors if the targets are met. Meeting the targets should release up to $12 trillion dollars of economic output annually.
This makes SDGs an important factor in investment decisions. Churches and foundations in particular have always been very careful to invest their money in an ecologically and ethically sound manner. But other institutional and private investors are also increasingly looking to invest their money in sustainable companies and projects. The SDG criteria offer welcome guidance in this regard.
Additional topics addressed
What many investors appreciate about the SDG is that they go beyond the ESG criteria that have long been familiar in the financial sector, which focus primarily on the environment and climate protection (E), social standards (S) and good corporate governance (G). The UN's goals thus make the sustainable investment spectrum more multifaceted – not least because they address additional issues such as the fight against poverty and hunger, lack of education and promoting peace and justice.
Furthermore, in a classic ESG approach the primary aim is to exclude unsustainable companies from the investment universe. With the 17 UN goals, investors can select companies from the remaining universe that make a positive contribution to achieving the SDGs. This increases the incentive for companies to strengthen their commitment to sustainability and to expand products and services that contribute to the SDGs.
"Mobilising private investment was part of the concept from the very beginning," says Paul Buchwitz, manager of the DWS SDG Global Equities fund. "The United Nations knew that the 17 goals could not be financed using only government funds."
Turnover in line with sustainability goals
DWS Invest SDG Global Equities invests in companies that make a measurable contribution to at least one of the 17 sustainability objectives. "SDG criteria favour targeted selection of stocks that actively contribute to reducing poverty, inequality, climate and environmental degradation," says Buchwitz. "Naturally, our approach encompasses compliance with ESG standards but it goes beyond that. Before we invest, we want to know exactly what a company is doing - whether it is actually generating sales in accordance with at least one of the UN sustainability goals". His benchmark is that on average across all the companies he invests in 50 percent of earnings should contribute to achieving the 17 goals.
An example shows how valuable it can be to combine deliberately selecting companies that contribute to fulfilling the SDGs with examining classic ESG criteria. Let’s take a world-leading pharmaceutical company that fights many diseases, from high blood pressure and diabetes to depression and asthma. It generates 58 percent of its sales from products and services that directly contribute to the third SDG: "ensuring a healthy life for all people of all ages and promoting their well-being". However, as the company is also involved in scandals, the most serious of which concerns manipulating pharmaceutical data, it would fall at the ESG hurdle.
SDGs cover almost all areas of life, which means they are also an important economic factor.
So, sustainable investment means constantly being active, and tracking down and classifying new developments. And that is how DWS has operated in this area for many years. As early as 2008, it was one of the first asset managers worldwide to sign the United Nations Principles for Responsible Investment (PRI). In 2018, DWS integrated SDGs into its ESG Engine, in-house software that uses data from five rating agencies specialised in different ESG criteria to create its own sustainability ratings, lists of best performers and possible warning signals.
ESG and sustainability have become an integral part of asset managers‘ research and analysis and an important criterion in investment decisions and new product development. The portfolio currently comprises more than 30 active and passive retail funds.
Details of DWS Invest SDG Global Equities LD
- Management Company: DWS Investment S.A.
- Currency: EUR
- Launch date: 02.11.2018
- Total assets: 703,46 Mio. EUR
- Fund asstes (shareclass): 662,50 Mio. EUR
- Earning: distribution
- Fiscal year: 01.01. - 31.12.
- Management fee: 5,00%
Risks of DWS Invest SDG Global Equities LD
- Market-, sector- and company-specific price volatility
- Possible exchange-rate risk
- Possible dividend cuts
- Because of its composition or the techniques used by its managers, the
fund is subject to heightened volatility. Consequently, unit prices may fluctuate sharply in either direction within short periods of time.
- The value of the fund's shares may fall below the price at which the client originally bought them.
Performance of the last 5 years in 12-month-periods of Risks of DWS Invest SDG Global Equities LD
16.10.2019 - 16.10.2020
02.11.2018 - 16.10.2019