The Sustainable Development Investments Asset Owner Platform, known as SDI AOP, offers the opportunity to standardise SDG impact measurement and develop a broad benchmark for the Sustainable Development Goals (SDGs).
“The platform can become a global standard for SDG investing,” said Manuela Sperandeo, Head of Sustainable Indexing for EMEA at BlackRock, in conversation with Investment Officer.
BlackRock recently joined the SDI AOP. This platform helps investors to assess companies on their contribution to the SDGs of the United Nations. BlackRock will use the SDI AOP dataset for various purposes.
Firstly, the data will be used to supplement our internal research into the sustainability of individual companies. “The platform is very useful for our due diligence processes,” said Sperandeo. “We will also use the data to develop new products. We will do this together with index builders who will use the data to compile specific sustainability indexes, which can then be tracked by our products.”
Sperandeo said these will mainly be index products with a ‘tilt’ strategy, in which companies with the highest SDG scores have the heaviest weighting. “This is what our customers need most at the moment. But the data are also suitable for indices based on the so-called best in class approach, consisting of companies that, within their sector, contribute most to the realisation of the sustainable development goals.”
Standardising SDG impact measurement
Sperandeo is most enthusiastic about the new possibilities the SDI AOP offers to analyse companies when it comes to sustainable development goals. Measuring SDG performance, she said, is a challenge.
“Shares have often been listed for a long time, so there are no current prospectuses, unlike green bond issues. That is why impact investing based on this platform is less obvious. However, the data is getting better and better, and therefore the transparency about the actual sales that companies generate with products and services that contribute to the Sustainable Development Goals is also improving.”
BlackRock sees the SDI AOP as the next generation of data that goes even deeper than previously possible. “The platform offers the opportunity to standardise SDG impact measurement. This is very important to us, because index investing is ultimately about creating standards for portfolio construction.”
Sperandeo sees a growing interest in SDG investing in BlackRock’s client base. One of the driving forces is new regulation, such as the Sustainable Finance Disclosure Regulation, which is intended to prevent green-washing, among other things.
The upcoming SFDR level 2 regulation goes one step further in the ESG reporting requirements to end investors. From the point of view of information provision, the importance of good data is therefore increasing. “Clients increasingly ask us to build portfolios in line with the SDG targets and to be able to report on this based on the same methodology.”
Global benchmark
BlackRock does not yet use the dataset for index impact funds. Impact investing offers too few opportunities to create well-diversified index products. “For that reason, our index impact investments currently only consist of green bonds. That market is well established and very transparent, so that the actual impact of the issuers can be mapped out well.”
So far, according to Sperandeo, making portfolios more sustainable has mainly consisted of integrating ESG into the core. However, investing in line with the sustainable development goals is clearly on the agenda of many investors and we notice that there is a particular need for a good benchmark. Together with analysis and index builders such as Qontigo and the asset managers affiliated to the platform, we are therefore researching a well-diversified benchmark. The platform can grow into a global standard for SDG investing.
This article originally appeared on InvestmentOfficer.nl.