Stockholm (NordSIP) – A scientific framework to inform investment decisions while contributing to the United Nations Sustainable Development Goals (SDGs) has been developed by scientists at CUNY and Harvard Universities in partnership with UBS Asset Management.
The framework was described in an article published in the journal Science last week by Dr Charles J. Vörösmarty, founding director of the Environmental Sciences Initiative at the Advanced Science Research Center at CUNY, and Dr John Spengler, Professor of Environmental Health and Human Habitation at Harvard, who led the research effort.
Researchers analysed the environmental and health benefits of a $2.1 billion portfolio of public equities managed by UBS AM on behalf of Dutch pension fund PGGM by taking the key SDG areas of water, climate change mitigation, human health and food security into consideration. Data extracted from advances in earth observation and modelling, epidemiology and public health was linked to corporate and financial data to determine how products and services can contribute to more sustainable environments.
In turn, the research suggests new ways for investors to assess corporations’ sustainability by providing ‘systematic, transparent and verifiable metrics of success based on well-established scientific approaches’, as opposed to the disclosure of companies, which is often skewered to reflect better on the companies themselves. In addition, corporate practices vary in terms of business operations across different regions and sectors. The framework therefore provides an important sustainability benchmark.
“Our proposed framework relies on scientifically-based metrics to help investors evaluate how companies’ actions, products and services support the environment and human well-being,” said Vörösmarty. “Indeed this is a new calculus for sustainable investing,” he said, suggesting that other frameworks assessing corporate sustainability foci provide limited guidance for assessing the longer-term impact of business practices.
The paper also proposes practical steps for a formal dialogue space for information sharing and best practices bringing together scientists, executives and auditors with the financial sector.
“Institutional investors are facing growing pressure to invest sustainably, and to measure the positive environmental and social impacts of their portfolio. Developing the right approach to the UN SDGs requires expertise beyond fundamental investing, including scientific research, data collection and management,” said Dr Dinah Koehler, executive director and head of research on the Sustainable Investment team at UBS AM, adding that the framework would provide investors with transparency into the impact of their portfolios on environmental and social challenges.
The UBS AM collaboration provided researchers with access to the PGGM portfolio to analyse the suggested framework, allowing it to bypass hypothetical modelling and use real-world data.
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