Investors who use the United Nations’ 17 Sustainable Development Goals in their ESG analysis can better identify best-in-class companies and produce best-in-class ESG outcomes, according to new research by Martin Currie, part of Franklin Templeton Group.
The United Nations developed 17 Sustainable Development Goals (SDGs) for national governments as a “blueprint to achieve a better and more sustainable future for all”.
“We are increasingly using SDG mapping to frame ESG analysis and engagement,” says Martin Currie’s CEO Julian Ide, “and we continue to develop new initiatives in our effort to achieve best-in-class ESG outcomes at the companies we invest in. We think of it as future-proofing our ESG toolkit.”
Moreover, these SDGs can be used by investment firms to ensure businesses they invest in are able to produce long-term sustainable growth, says David Sheasby, Head of Stewardship and ESG at Martin Currie.
Discussing the launch of the second Martin Currie Stewardship Matters report, Edition: Sustainable Development Goals, Sheasby highlighted the importance of investors using other criteria to complement their existing ESG analysis.
“SDGs provide us with a useful lens through which to analyse a company’s sustainability. Any investment manager worth their salt should have a keen eye on what a firm’s long term sustainability prospects are.
“Analysing companies through the UN’s 17 SDGs can show which are best placed to benefit from and contribute to the ever-increasing move towards sustainable investing,” he adds.
Although the 17 SDGs do not necessarily lend themselves perfectly to ESG analysis of investment targets, the underlying 169 specific targets are relevant to businesses, says Sheasby.
Sheasby says in some cases, there are clear linkages to the aims of the specific targets, but added many companies are too complex to neatly align with goals.
“Using these new criteria allows us to look at how goods and services are delivered, instead of just what those goods and services are. Investors that do not incorporate these facets in their own analysis could be investing in companies ill-poised for long-term growth.
“In Asia, for example, we can use SDG seven (affordable and clean energy), 11 (sustainable cities and communities) and 15 (life on land) as a way to ensure that firms operating in the region look at how their pushes to improve financial inclusion do not have negative knock on effects on the environment,” Sheasby says.
Firms in sectors such as Tech, Consumer, Financials and Healthcare must have rigorous cybersecurity procedures in place if they are to be sustainable in the long term, according to Sheasby. By looking at the 9th SDG, industry, innovation and infrastructure, investors can assess which corporates would be most at risk from cybersecurity attacks.
“There are clear risks associated with investing in companies, although may see short term share price appreciation, are not well placed to see long term sustainable growth,” Sheasby says.