Stockholm (NordSIP) – On April 10, DWS, formerly known as Deutsche Asset Management and one of the world’s largest asset management houses with €700 billion AUM, just announced a new rating system which integrates the UN Sustainable Development Goals (SDGs). This set of 17 goals and its 169 associated targets are often referred to within sustainable investing, as they represent a list of concrete steps in the three environmental, social and governance dimensions. The challenge often encountered when integrating these principles into portfolio management is the ability to measure correctly and asset impact in relation to the SDGs.
To establish its rating, DWS says it includes ESG Sustainable Impact Metrics data from index and sustainability data provider MSCI. DWS adds it to its own broader ESG data set, called the “ESG Engine” to measure the extent to which companies’ products and services support the SDGs. This assessment applies both to equities and bonds.
Based on this rating method, DWS is able to select the companies that qualify as ESG leaders, which should both contribute positively to the SDGs but also comply with the broader ESG quality and norm tests. In a new research report, DWS finds that less than half of the companies in a selection of benchmark equity indices contribute positively to the SDGs. On the positive side, the report finds that Nordic countries come at the top when measuring the contribution to SDGs by country, with Sweden at the first place.
One way to integrate the notion of country rankings into an investment strategy is to consider the SDG framework in sovereign bond funds. For example, DWS says its ESG Engine ranks sovereigns incorporating, among other things, a country’s human rights record, prevalence of the death penalty, corruption, electoral democracies versus autocratic regimes, military spending and nuclear arms.