Major funds launch toolkit to help measure SDG impact

SHARE

Cambridge University’s Investment Leaders Group (ILG) has developed a framework that allows investors to measure the impact of their investments against the Sustainable Development Goals.

The ILG a global network comprises of pension funds, insurers and asset managers,  including PIMCO, Union Bancaire Privée and Zurich Insurance, convened by the Cambridge Institute for Sustainability Leadership (CISL).

The framework uses existing data to help the industry assess funds against six themes derived from the 17 SDGs:

  • Resource security
  • Healthy ecosystems
  • Climate stability
  • Basic needs
  • Wellbeing
  • Decent work

The dashboard uses a traffic light system to categorise impact from very negative (red) to very positive (deep green).

“The reality of environmental and social disclosure is that we struggle to answer one of the most basic questions that can be asked about a fund: Is it doing harm or good?” said Dr Jake Reynolds, executive director at the Cambridge Institute for Sustainability Leadership, and lead author of the report.

The report proposes both ideal and base metrics for each of the six SDG themes, so that fund managers can make the first stabs at measuring impact, while the industry tries to come up with better metric over the longer term. Both sets are intended to provide objective, comparable, consistent and reproducible results.

But Dr Jake Reynolds, executive director at the Cambridge Institute for Sustainability Leadership, and lead author of the report, warned at the launch event at the Institute of Directors in London last week that the framework is only a crude approximation, compared to the ideal metrics that will need to be developed in future to measure impact.

“The reality of environmental and social disclosure is that we struggle to answer one of the most basic questions that can be asked about a fund: Is it doing harm or good?” Reynolds said.

“It’s very hard to properly generate, with today’s data, the tests that you’d want to make on a fund. These would be extremely complicated, deep evaluations of a firm’s operations and its value chains.”

The framework measures impacts against SDGs including climate stability.

For example, on decent work, ideally one would want to know the total number of jobs that pay a living wage and offer safe and healthy working conditions. However the closest approximation today is data from Bloomberg on the number of workers in full-time employment.

When it came to measuring resource security, the best information available to the industry at scale was total net waste. But the ideal metric would explore losses of products into the environment as well as toxicity and scarcity of materials within a circular economy.

And on the healthy ecosystems theme, the closest approximation was data on fresh water use. “That’s a pale shadow of what we want to be measuring,” Reynolds said.

All investment has impact, and arguably it’s more important to discover what the impact is of a fund when it is very conventional

The report proposes both ideal and base metrics for each of the six SDG themes, so that fund managers can make the first stabs at measuring impact, while the industry tries to come up with better metric over the longer term. Both sets are intended to provide objective, comparable, consistent and reproducible results.

Reynolds pointed out that getting an accurate measurement of social and environmental impact was not just a question for impact funds, which have a desired social or environmental impact. “All investment has impact, and arguably it’s more important to discover what the impact is of a fund when it is very conventional. This goes right across the capital mix.”

Union Bancaire Privée (UBP), one of the members of the Investment Leaders Group, stress-tested the framework on its newly launched Positive Impact Equity fund, a portfolio of 25-35 stocks of companies that “address the world’s most pressing environmental and societal challenges”.

By using the framework we can move into the carbon footprinting space with much more clarity

EMAIL US

hello@responsible-investors.com

SPREAD THE WORD

The purpose of this site is to serve as a daily news source and learning point for ESG, SRI and Impact investment trends and to promote awareness of environmental, social and governance issues and opportunities. 

The information provided by this site is not a recommendation to invest or purchase products. This site does not take into account your particular investment objectives, financial situation or investment needs, all of which should be considered prior to making an investment decision. We encourage seeking professional financial advice before making any investment decision.

 By Responsible-Investors ©