The UN Sustainable Development Goals (SDGs) are the globally agreed framework for achieving a better and more sustainable future for all. But how are investors finding ways to invest in alignment with them?
- Many investors are aligning investments with the UN SDGs. The SDGs comprise 17 goals and 169 targets, and fall into three categories: Economic, social and environmental development.
- The SDGs provide a measurable opportunity for investors. Accordingly, investors are integrating ESG factors into investment decisions, improving ESG performance through active ownership, and allocating assets to thematic investments.
- Refinitiv can help you assess how your fixed income investments align with the SDGs through Refinitiv Country SDG Scores.
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The SDGs provide a blueprint for peace and prosperity for people and the planet.
The SDGs are 17 goals that outline calls to action by all countries that rely heavily on the private sector, hence the involvement of investors. The goals fall under three broad topics: Economic, social and environmental development. And 169 targets fall under the 17 goals.
Many investors have bought into the idea of investing in line with the SDGs. However, others may still question why the SDGs are a relevant consideration for their investment strategies.
Aims and objectives of the SDGs
- The SDGs are a globally agreed sustainability framework. As such, they can be thought of as the most important factors contributing to world health. They also provide guidance on what sustainable trends are relevant to the investment community.
- As the objective of the SDGs is to protect the health of the planet by aligning investments with the overall goals, investors need a long-term plan to invest in sustainable companies.
- If the SDGs are not achieved, macro-financial risks will appear, putting investor returns at risk and increasing widespread economic risks.
- SDGs are a good indication of risks for investors in the future, and also allow investors to articulate the decisions they have been making.
The SDGs provide a measurable opportunity for investors, and they are responding by integrating ESG factors into investment decisions, improving ESG performance through active ownership, and allocating assets to thematic investments.
Investing bonds in sustainable projects
There have been large moves to ensure capital is directed towards sustainable securities. But what are investors’ plans to ensure that the bonds in their portfolios are directed towards sustainable projects?
A large portion of the funds raised through green bonds have been issued by sovereigns, not corporations. To understand how green bond issuance informs the country carbon performance, investors need information on the issuer — in this case the country — and this must be tracked alongside the issuance.
Because so much green financing is issued by sovereign issuers, it is necessary to use a country scoring system that can be used to align issuance with issuers.
Investors may attempt to create their own scoring system but this comes with a number of problems, including:
- Misinterpretation of data
- Lack of data
- Lack of benchmarks
- A robust methodology to map data to SDGs
To respond to this investor need, Refinitiv has created Country SDG Scores.
Watch: Investing in bonds aligned to the UN Sustainable Development Goals
Refinitiv Country SDG Scores
Refinitiv Country SDG Scores helps investors overcome the problem of mapping bonds to the SDGs. The scores are designed to transparently and objectively measure a country’s relative performance across each of the sustainable development goals and sub-metrics.
The underlying data which goes into calculating the score can’t be classed as new. However, by bringing scattered data sets together, we are able to provide one score to work from.
Our robust methodology provides a framework for investors. At Refinitiv, we have a strong history of ESG scoring methodologies, which ensures we provide transparency to the market. This in turn has resulted in our scores becoming trusted by the industry.
Insight from the Refinitiv Country SDG Scoring template
If we are looking at countries with the highest Overall SDG score, we find that Iceland and Norway top the charts. Scoring in the top 10 for:
Taking a closer look at some of the SDGs which focus on environmental issues, we see a variety of countries performing well depending on the area of focus.
- SDG 6: Clean Water and Sanitation — There are 34 countries that are joint leaders with a score of 9, all with full data criteria available.
- Clean Energy — Four countries have full data available and have the highest score of 10 for this goal – Iceland, Albania, Kyrgyzstan and Tajikistan.
- SDG 13: Climate Action — Our scoring system shows that the countries with the highest scores with all scoring criteria available are all in Asia-Pacific or Africa.
- SDG 15: Life on Land — The data shows that countries with full data criteria available and the highest score of 9 are all in Europe, with the exception of Palau.