In 2015, the United Nations launched the 17 Sustainable Development Goals (SDGs) that were adopted by 193 countries. The SDGs outline a set of objectives to be achieved by 2030 that aim to end poverty, hunger and inequality, while tackling climate change, improving health and education and spurring economic growth. Sustainable and responsible investments represent high-potential sources of capital for the SDGs and, as of 2016, US$18.2 trillion was invested in this asset class, and the bond market for sustainable business is growing rapidly.

Gaining Insights to Align Investments

The Trucost SDG Analytics Dataset helps investors understand which companies are contributing towards the SDGs by identifying categories of products, services and technologies that directly aid the achievement of each of the targets. The dataset also provides information on how exposed a company may be to SDG-related risks, or risks that may detract from achieving the goals. Given this, the data can be used by investors to analyze potential exposure to a variety of SDG-related risks, measure SDG-alignment, benchmark companies against each other in terms of their SDG performance, screen or optimize portfolios and report to stakeholders.

Accompanying the Trucost SDG Analytics Dataset is the Trucost SDG Revenue Share Dataset that enables investors to calculate the proportion of company revenues that are aligned to the SDGs. By aggregating the percentage of revenue for each company from the 17 SDGs, we arrived at a total percentage of a company’s revenue that is aligned to all SDGs.

We assessed whether there was any outperformance/underperformance within equities that exhibit higher/lower percentages of SDG revenue by running a back test on the S&P 500^® and the MSCI World indices. A portfolio of companies with the highest level of SDG revenue did in fact outperform others. Importantly, portfolios can be aligned to top SDG companies while maintaining their underlying benchmark characteristics. 

The SDGs have garnered widespread backing for their effective harmonization of the three dimensions of sustainable development — social inclusion, environmental protection and economic growth. Gaining insight on companies that are pursuing sustainable development through their business models can help direct additional funds to this critical undertaking.

Click here to read the full report and learn more about this important dataset.

Check out other blogs in this series Aligning Portfolios With The EU Taxonomy and Tracking Progress On Meeting The Paris Agreement Goals.

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