MSCI launches tool to help investors align with UN Sustainable Development Goals

MSCI launches tool to help investors align with UN Sustainable Development Goals

MSCI has launched a tool to help investors assess their exposure and alignment to the United Nations Sustainable Development Goals (UN SDGs).

The MSCI SDG Alignment Tool is designed to provide investors with a complete view of a company's net contribution - both positive and negative - towards addressing each of the 17 UN SDGs.

The launch follows MSCI's collaboration in 2018 with the Organization for Economic Co-operation and Development (OECD) on a joint discussion paper, Institutional Investing for the SDGs, which was intended to spark discussion among stakeholders and market participants.

Five years on from the adoption of the UN SDGs, we are at a critical juncture."

The tool brings together MSCI's framework covering over 8,600 equity and fixed income issuers, with analysis of the full range of a company's operations, products, services, policies and practices, to evaluate its net contribution to addressing the global challenges the UN SDGs aim to tackle.

The tool allows for flexible use of its model towards specific impact investing goals or focused on specific alignment dimensions, powered by data inputs from MSCI ESG Research's core research products.

Remy Briand, head of ESG at MSCI, commented: "Five years on from the adoption of the UN SDGs, we are at a critical juncture. There is increasing demand from investors to channel capital to help deliver on these goals, but the fragmented data around the extent to which a company's products and operations are aligned to a particular SDG remains an obstacle.

Through this new tool we are seeking to provide an additional layer of transparency for investors to better assess the merits of claims put forth by their portfolio companies. With the target deadline for achieving the SDGs only a decade away, the standardization of that assessment is critical."

The framework behind the MSCI SDG Alignment tool draws on publicly available information, rather than solely relying on companies self-declared alignment with the goals, to provide a holistic view of alignment.

Based on data from the new tool MSCI found that:

  • Across all 17 SDGs, 54 percent of MSCI ACWI constituents were mostly aligned, meaning that they showed no strong misalignment on any of the SDGs and had more areas assessed as aligned than misaligned.
  • SDG 8 (decent work and economic growth) showed the highest degree of alignment: of the MSCI ACWI constituents (as of August 11, 2020), a third were found to be aligned or strongly aligned with the goal either through offering products enabling economic advancements (such as SME financing, digital divide solution, or education materials and services) or supporting inclusive and fair employment and support for communities.
  • Goals 7 (clean energy), 12 (sustainable consumption and production) and 13 (climate action) had the highest percentage of companies (8%-9%) misaligned with the goals, driven mostly by continuing reliance on fossil fuels.

Briand continued, "We have found that companies can both overstate and understate their commitments to particular SDGs, which could undermine efforts by institutional investors to advance sustainable development."

"Investors pursuing an impact investing approach could find that portfolio companies claim to support an SDG while being implicated in conduct that may belie that support. Conversely, some companies that fail to publicly commit to any SDG but may align with at least one of the goals may fall below the radar of impact investors seeking to target positive impact companies."

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Christopher Copper-Ind

Christopher Copper-Ind is editor-in-chief of International Investment. Before this, he was editorial director of The Business Year, from 2014 to 2017.