Last year marked five years since the UN adopted the 17 goals for a holistic approach to achieving sustainable development. These SDGs are a universal call to action to end poverty, protect the planet, and improve the lives and prospects of everyone, everywhere. A collective effort by the private sector, the financial industry, governments and other actors is essential to achieve them.
ALIGNING TO SDGS
At Kempen, we want to invest in companies that help achieve the SDGs. This, of course, is easier said than done.
Most companies do not have a mature SDG-linked reporting strategy in place and, therefore, the data available to investors is generally of low quality or insufficient quantities.
2020 was a major turning point for Kempen as we started working with a new SDG data provider for listed asset classes – and together looked for meaningful ways to bring the measurement of SDG alignment into the heart of our investment decision-making. This means that funds such as our Global Sustainable Equity Fund allocate scores to companies based on the percentage revenue a company contributes to individual SDGs from their underlying products and services. Looking at revenue percentages derived from products and services that are aligned with the SDGs lends itself as a proxy of SDG contributions in listed asset classes.
As shown in the figure below, the Kempen Global Sustainable Equity Fund’s (KGSEF) holdings derive a higher percentage of their revenue from products and services contributing to the SDGs (i.e. healthcare products and services, sustainable energy) than the benchmark and a lower percentage of their revenues obstruct the SDGs (i.e. fossil fuel based products) compared to the benchmark. It also outperformed its benchmark financially. This score means that we have a means to identify engagement opportunities and maximise positive impacts.
Figure 1: Overall Contribution or Obstruction of the KGSEF as % of Total AUM
In 2020 we have made a preliminary first assessment of Kempen’s sustainable equity funds based on percentages of revenues investee companies derive from products and service that support or obstruct the achievement of specific sustainable development themes that relate to the SDGs. By linking the SDG alignment to a company’s revenues, we can calculate our indicative attribution, resulting in an overall alignment in monetary terms to the social capital-related SDGs.
Eszter Vitorino is Senior Advisor Impact & Sustainable Investment at Kempen Capital Management