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Investing in the UN Sustainable Development Goals: Opportunities for Companies and Investors
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2017
Year
EngineeringEconomic DevelopmentIntegrated ReportingSustainable DevelopmentPerformance Measurement SystemsBusiness AnalyticsIndicator DevelopmentSustainability AccountingRisk ManagementManagementSustainable Development GoalsHypothetical KpisQuantitative ManagementEconomicsKey Performance IndicatorsEconomic OutcomesGeneral BusinessCorporate Social ResponsibilityStrategic ManagementSustainable Development GoalSustainable FinanceFinancial AnalyticsInvestmentBusinessBusiness StrategySustainabilitySustainable Investment
The UN Sustainable Development Goals set ambitious global targets that offer companies and investors a path to value, yet present risks and uneven reporting, with expectations that KPI reporting will become standard as data improves. The study aims to guide companies and investors in preparing for the SDGs by determining exposures, setting KPI‑based goals, and establishing measurement systems, and introduces a tagging approach to alert investors to key SDG exposures. The authors propose a tagging method that identifies companies’ primary SDG exposures and recommend a framework of exposure assessment, KPI goal‑setting, and systematic measurement and reporting. Although companies increasingly reference SDGs, discussion of targets and KPIs is rare, but the author provides hypothetical KPIs and examples of pioneering firms.
The UN's Sustainable Development Goals (SDGs) are a set of ambitious targets for making the world a better place. For both companies and their investors, the pursuit of SDGs offers a “path to value” while addressing social problems—but a path that presents significant risks as well as opportunities. To prepare themselves for the SDGs, companies and investors will have to take a number of steps: (1) determine the extent of their exposures to those SDGs that are most relevant to their businesses or investment approaches; (2) set specific goals for contributing to the most relevant and material SDGs, which means among other things reflecting such goals in incentives through the use of carefully designed metrics, or key performance indicators (KPIs); and (3) establish a system for measuring and reporting on contributions to the SDGs. For investors, it is important to recognize that not all SDGs are equally investable and that reporting on key SDG performance indicators is still too new and uneven to rely on for investment purposes. To overcome this problem, the author's firm has developed a tagging approach that alerts investors to companies' main SDG exposures. As better data becomes available, the metrics and reporting will improve. Although companies are increasingly referring to the SDGs in their investor communications, corporate discussion of targets and KPIs on the SDGs is rare. But reporting of such KPIs is likely to become the norm as investors begin to expect companies to report on their progress on achieving their goals. The author offers a number of hypothetical KPIs for SDGs while providing several examples of pioneering companies.