Academics backed by UBS test new sustainable investing “calculus” on PGGM equities portfolio

Scientific framework developed that will inform investment decisions

What is being hailed as a “new calculus” for sustainable investment that has been unveiled by a team of academics backed by UBS Asset Management is being tested on an equities portfolio at Dutch pension investment giant PGGM – which says the research is of “great interest”.

Academics at the City University of New York (CUNY) and Harvard University say they have developed a scientific framework to inform investment decisions that make positive contributions to sustainable environmental stewardship and human well-being.

The team is calling for a “formal dialogue space” for the exchange of information and best practices to be set up as a “strategic alliance of asset owners and managers, companies, auditors, nongovernmental organizations, and scientists”.

This would, it is hoped, catalyze rational debate on the specific kinds of corporate disclosure and scientific data, their reporting frequencies, and spatial characteristics.

In essence, the research says a more comprehensive approach to impact measurement could happen if the financial sector joined forces with the scientific community to develop scientifically verifiable corporate sustainability disclosure. Such metrics could inform investors wary of “green washing”, the paper says.

“If such a change is realized, we foresee a huge investment space opening, based on verifiable net positive impacts,” the team says.The method – detailed in a paper published by the prestigious Science journal this week – looks at companies’ real world impacts and not merely their internal processes.

“A methodology that is scientific and scalable”

“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. Indeed, this is a new calculus for sustainable investing,” said CUNY’s Charles Vörösmarty.

The researchers are testing the framework by analyzing the environmental and health benefits of a $2.1bn portfolio of public equities managed by UBS Asset Management for PGGM. Four areas are being considered: water, climate change mitigation, human health and food security.

“As an investor, one of our most important goals is to measure the tangible effects of our investments against the Sustainable Development Goals we selected,” said Piet Klop, senior adviser of responsible investment at PGGM.

“The approach that CUNY and Harvard have pioneered is of great interest to us due to its focus on product impacts and a methodology that is scientific and scalable.” News Release