09. Mai 2019 Equities

SDG: Mission Possible

The UN wants to save the planet with its 17 sustainability goals and has set a deadline of 2030 to achieve it. But its mission critical is only possible if investors begin following the SDG guidelines.

  • Investors can invest in UN sustainability goals
  • MSCI filters out sustainable stocks
  • Sustainable investments are crucial for our survival
Lesezeit

People who are motivated to make the world a more sustainable place usually start at home: take a shorter shower, fly less or reduce meat intake to once a week – there are many ways to bring sustainability into everyday life. This also applies to your wallet. If you invest your assets in the right places, you can make a positive contribution to the environment, to your fellow human beings and make money. Sustainable Development Goals (SDGs) serve as a guideline for sustainable investors. Set down by the United Nations (UN) in 2015, these 17 goals were formulated to secure the future of people and our planet. Investors can help the world to achieve these critical goals if they follow the protocols.

87%

of managers at leading companies believe that SDGs provide an opportunity to rethink approaches to sustainable value creation.

Not all SDGs are eligible for investment

Five to seven trillion US dollars must be raised worldwide in order to implement the goals of the UN’s Agenda 2030 on time.[1] But not all SDG targets are suitable for investors. So, if an investor wants to include SDGs in his portfolio mix, they must focus on the actionable issues: climate change, natural capital, basic human needs and empowerment.[2] These include investments in climate protection, clean water, health and responsible production.

An investor who wants to integrate all four objectives into his portfolio invests his money in companies with the appropriate business model. When it comes to climate protection, for example, companies from the photovoltaic sector are suitable, while companies that produce filter systems are a good choice for clean water. When it comes to human health, biotechnology companies that are particularly innovative and sustainable come into the selection criteria. Or if an investor invests in responsible production, his portfolio can include recycling companies, for example.

Stock selection depends on SDG-relevant turnover

But when faced with a vast investment universe, how can a single investor siphon off the companies that are committed to the UN's sustainability goals? Guidance is available in the form of the MSCI Sustainable Impact Metrics. The MSCI method is applied to measure the proportion of a company's turnover that contributes to SDGs. This way an investor can determine which companies in an index are particularly relevant for the sustainability goals. From the MSCI ACWI Investable Market Index (IMI), for example, 650 shares meet the criteria of an SDG champion – companies whose sales make a significant contribution to the sustainability targets. The most sustainable among them have an SDG contribution of more than 75 percent of sales: in the case of the MSCI ACWI IMI, this is around 140 shares.

People who invest in these kinds of shares can achieve not only a decent financial return but also an ecological or social return benefit. Unlike conventional ethical investments – which only filter out companies with controversial environmental or social standards –investors can put their capital specifically into companies that are trying to solve the world's problems. This unique form of investment is called "impact investing".

89%

of managers confirm that their efforts and commitment to sustainability have a real impact on their industry.

85%

of managers believe that cross-sector partnerships are critical to achieving the SDGs.

Investments in SDGs protect the planet

Sustainable investments can make a huge difference. Almost 90 percent of business leaders confirm that efforts and commitment to sustainability have a real and positive impact on their industry, according to an analysis by Accenture in 2018[3]. To sum up with the words of the former US President Barack Obama: "We are the first generation to feel the effect of climate change and the last generation who can do something about it.”[4]

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1. Source: United Nations Development Programme (MDGs), DWS International GmbH; January 2019

2. Source: Empowerment = Strategies and measures aimed at increasing the degree of autonomy and self-determination of communities and enabling them to represent their interests on their own responsibility.

3. Source: „Transforming Partnerships for the SDGs“, Accenture, 2018

4. Source: https://twitter.com/BarackObama/status/514461859542351872

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