MSCI has launched a tool to help investors assess their exposure to and alignment with the United Nations’ Sustainable Development Goals (UN SDGs), as investors demand proof of impact from their ESG portfolios.
The MSCI SDG Alignment Tool is designed to provide investors with a complete view of a company’s net contribution – both positive and negative – towards addressing each of the 17 UN SDGs.
The tool, available though the MSCI ESG Manager platform, allows investors to measure and report on the alignment of their portfolios with the SDGs, develop SDG-themed investment products, comply with client mandates and identify companies better aligned with each SDG.
See also: – Achieving SDGs 62 years behind schedule
The model provides 17 SDG net alignment scores and assessments for each of the UN SDGs on a scale from ‘strongly aligned’ to ‘strongly misaligned’. It also offers assessments on two dimensions – product alignment and operation alignment – for each company and for each of the 17 goals.
The tool draws on publicly available information and MSCI data covering 8,600 equity and fixed income issuers, including analysis of the full range of a company’s operations, products, services, policies and practices.
The launch follows MSCI’s collaboration with the Organization for Economic Co-operation and Development (OECD) on a joint discussion paper, Institutional Investing for the SDGs, published in 2018.
Remy Briand, head of ESG at MSCI, said: “Five years on from the adoption of the UN SDGs, we are at a critical juncture. There is increasing demand from investors to channel capital to help deliver on these goals, but the fragmented data around the extent to which a company’s products and operations are aligned to a particular SDG remains an obstacle.
“Through this new tool we are seeking to provide an additional layer of transparency for investors to better assess the merits of claims put forth by their portfolio companies. With the target deadline for achieving the SDGs only a decade away, the standardization of that assessment is critical.”
According to MSCI, some 54% of MSCI ACWI constituents are mostly aligned with the 17 SDGs. The highest degree of alignment was evident on SDG 8 (decent work and economic growth).
On the other hand, goals 7 (clean energy), 12 (sustainable consumption and production) and 13 (climate action) had the highest percentage of companies (8%-9%) misaligned with the goals, driven mostly by continuing reliance on fossil fuels.
See also: – Impact investing can help emerging markets attain the UN SDGs
Briand said: “We have found that companies can both overstate and understate their commitments to particular SDGs, which could undermine efforts by institutional investors to advance sustainable development.
“Investors pursuing an impact investing approach could find that portfolio companies claim to support an SDG while being implicated in conduct that may belie that support. Conversely, some companies that fail to publicly commit to any SDG but may align with at least one of the goals may fall below the radar of impact investors seeking to target positive impact companies.”
