Index and ESG data firm MSCI has today launched new offerings designed to align investment with the Sustainable Development Goals (SDGs), the successors to the Millennium Development Goals that were adopted by the United Nations last September.
It follows a market consultation with leading asset owners and managers, MSCI says, and comes as the responsible investment community has been pondering how to incorporate the SDGs.
Just last week, Kris Douma PRI noted how they “require us to think again”. In March Catherine Howarth of ShareAction proposed working with the PRI on promoting them. The 17 SDGs aim to end poverty, protect the planet and ensure prosperity worldwide via a range of targets to be achieved by 2030.
The new MSCI ACWI [All Country World Index] Sustainable Impact Index (link) and MSCI ESG Sustainable Impact Metrics are designed to allow institutional investors to measure their exposure to listed firms that help to address crucial social and environmental problems.
“This framework was developed following a client consultation with more than 25 of the world’s leading asset owners and managers, who agreed that there is room for new impact-oriented thematic investment approaches in public equity markets,” said Linda-Eling Lee, MSCI’s Global Head of ESG Research.
She said that up till now, impact investing has largely been limited to small-scale, private equity strategies. But the SDGs “gave us the opportunity to offer tools to provide insight into what we define as Sustainable Impact.”MSCI is grouping the SDGs into five actionable themes: basic needs, empowerment, climate change, natural capital and governance. The new impact index identifies companies that have at least 50% of their revenues tied to products and services that address environmental and social challenges through the five themes.
The firm has identified 987 companies in the main MSCI ACWI index that derived revenues from sustainable impact themes. Among these companies, 339 companies derived at least 20% of their revenue and 123 derived the majority of their revenue from sustainable impact themes.
Expanding this to include small-cap companies, it identified 1,593 companies in the MSCI ACWI IMI Index with revenues tied to environmental impact themes.
The top five companies, by index weight, were Valeo (Pollution Prevention), Schneider Electric (Energy Efficiency), Pearson (Education), ABB (Energy Efficiency) and Vestas (Alternative Energy).
MSCI said the new offering outperformed the underlying ACWI benchmark by 1.7 percentage points on an annualized basis from November 2010-November 2015.
As part of the launch, MSCI ESG Research has published a 28-page document outlining a framework for aligning investment with the SDGs. ‘Toward Sustainable Impact through Public Markets’ was written by Veronique Menou and Laura Nishikawa. “Investors large and small are searching for ways to steer capital toward positive social impact,” they conclude.