Ireland-based KBI Global Investors (KBIGI) has been able to quantify its portfolios and give investors a score presented as a percentage as to how close their funds are to the UN’s sustainable development goals (SDG).
As Fundeye has previously reported, there is some confusion as to what actually constitutes environmental, social and governance (ESG) investing as investors and asset managers alike may have different views on the subject.
KBIGI has taken the brave and likely welcome step of publishing revenue alignment SDG scores (RASS) across a range of its natural resources portfolios, a sector where a move to a more sustainable way of doing of business is perhaps most needed.
The firm calculates the percentage of each investment portfolio’s revenue that is aligned with the SDGs, taking the total amount of revenue earned by the companies in their portfolios and allocating that revenue to various business activities. Then for each business activity, it decides whether that activity has a positive, neutral or negative impact in achieving the SDG, calculating on a weighted basis the percentage of any portfolio’s revenue (i.e. sales) which is positively or negatively contributing to the achievement of those goals.
By doing this, it is difficult to fudge the results and may give investors looking to put sustainability at the heart of their process a degree of certainty as to how KBIGI’s strategies achieve their stated goal.
The UN’s SDGs set 17 goals and sub targets for the eradication of poverty and hunger, the protection of the environment, the provision of clean water and sanitation, and prosperity for all back in March 2015. KBIGI has released the scores of its strategies which show how much of their portfolio’s revenues are going towards furthering the UN’s aims, a move that may cause other managers to follow.
For instance KBIGI’s Global Resource Solutions strategy had a RASS score of 75.7 percent for 2018, with just 1.4 percent of the portfolio detracting from SDGs. The portfolio contains companies active in a combination of three specialist strategies, namely water, energy solutions and agribusiness.
The SDGs to which the portfolio contributes most are SDG 2 (Zero Hunger), SDG 6 (Clean Water and Sanitation), SDG 11 (Sustainable Cities), SDG 7 (Clean Energy) and SDG 9 (Industry, Innovation and Infrastructure).
Eoin Fahy, Head of Responsible Investing at KBI Global Investors said, “We are delighted to be able to quantify the impact score of our portfolios (‘RASS’) in this unique and proprietary way. We haven’t seen any other studies that directly measure the revenues of portfolios to the UN SDGs and believe we are one of the few managers to measure and account for a negative element within our RASS score.
“This year we have added numerous new business activities – and interestingly, from our annual review, have started a number of new engagements with some of our companies. However, most important are the actual RASS results themselves and to have portfolios with scores in the 75% plus range is incredible. As investors’ appetite for high impact strategies continues to surge it is gratifying to be able to offer them a range of KBIGI strategies that deliver significant and measurable impact in such a clear and transparent way.”
Next month, Fundeye will be reporting direct from Amsterdam for this year’s Fund Forum ESG and Impact event.
