A relatively new asset owner-led platform providing information needed to decide on sustainable development investments is gaining global traction now that the world’s biggest asset management firm Blackrock has decided to join as a subscriber.
The Sustainable Development Investments Asset Owner Platform, known as SDI AOP, is a 2020 initiative by Dutch pension funds APG and PGGM, Canada’s BCI and AustralianSuper. Together, the four investment firms hold some 1.3 trillion euro in assets under management. Blackrock has approximately 10 trillion dollars under management.
The SDI AOP allows asset managers to measure their portfolio investments’ contributions to the SDGs. These goals, set by the United Nations in 2015, aim for a better, more prosperous world, by addressing urgent global issues such as water scarcity, healthcare access, and protecting the environment. Investments in companies whose products or services contribute to realising the SDGs are known as Sustainable Development Investments, or SDIs.
SDG-alignment growing in importance
“Such a firm commitment from a global player like Blackrock reflects the growing importance of SDG alignment in the overall responsible-investing landscape,” said James Leaton, research director at SDI AOP. “We look forward to working with them as we continually update and expand our offering.”
The SDI AOP dataset currently includes over 8,700 companies. The dataset is updated twice a year.
“The implementation of SDG-aligned investment strategies requires quality data with specific analytical methodologies,” said Carolyn Weinberg, managing director and global head of product, ETF and index investments at Blackrock. “We are pleased to strengthen our sustainable product and client offerings with the SDI AOP dataset.”
Based on the financial and non-financial returns that listed companies achieve with their products and services, SDI AOP provides insight into which companies deserve the SDI designation. Based on this data, it is possible to build portfolios that are in line with the SDGs.
‘A trend we’re seeing across the board’
“SDG alignment is clearly top of mind for our clients—including Blackrock—and it’s a trend we’re seeing across the board, from portfolio and index construction to stakeholder reporting,” said Sebastian Ceria, Chief Executive Officer of Qontigo, an index provider and financial intelligence firm that is part of Deutsche Boerse Group and that supports SDI AOP. “We are delighted to have played a role in bringing Blackrock and the SDI AOP together in support of the accelerating global shift to more sustainable investing.”
In 2021, Blackrock was named manager to two SDI-related institutional developed-market equities mandates tracking STOXX indices provided by Qontigo.
APG last year launched a 1 billion euro mandate tracking the iSTOXX® APG World Responsible Low-Carbon SDI Index in September and Dutch pension fund Philips Pensioenfonds introduced the iSTOXX® PPF Responsible SDG Index in December for a 4.5 billion euro mandate. Both of these indices incorporate multiple ESG inputs, including SDG alignment according to the SDI AOP taxonomy.
Design Authority defines SDI taxonomy
SDI AOP has established what it calls a ‘Design Authority’ that defines the SDI taxonomy and methodology. This then is translated by the data analysis company Entis into a practical analysis method based on artificial and human intelligence. Through analysis and index provider Qontigo, the data set of the SDI AOP is made available to third parties.
“We are delighted that Blackrock has chosen the SDI standard and has joined the SDI AOP community, which currently exceeds USD 10,000 billion,” said Claudia Kruse, president of the SDI AOP, in a statement. “Together with the other members of the SDI AOP, we will continue to expand the scope of the SDI standard and its applications.’
Some examples of parties using the platform’s data include APG, which is looking at how it can collect data to improve ESG scores and reduce carbon emissions. Since the fourth quarter of last year, iStoxx® APG World Responsible Low-Carbon SDI Index has also been used. This index examines climate developments and changes from various perspectives. One of the objectives is to reduce the CO2 footprint.
Pension funds embracing SDGs
Other pension funds also use the data, such as the Dutch pension fund for retailers, which uses SDGs for almost 50 percent of its portfolio, for example for its green bonds.
The Philips Pension Fund has also been using it since 2021, concentrating on four SDGs, namely: SDG 3 - Good Health and Well-Being; SDG 11 - Sustainable Cities and Communities; SDG 12 - Responsible Consumption and Production; and SDG 13 - Climate Action.
Blackrock is now also using the data to advise clients on the construction of ESG portfolios, for research, reporting, development of new products and adaptation of existing products. It highlights the importance, within the overall responsible investment framework, of companies contributing to the SDGs, said James Leaton, research director, SDI AOP.
The extent to which a contribution is made to the SDGs is clearly of paramount importance to our clients, including Blackrock, said Qontigo’s Ceria.
This article originally appeared in Dutch on InvestmentOfficer.nl.
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