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MSCI tool to help investors assess SDG alignment
New product offers complete view of a firm’s net contribution towards meeting UN goals
18 Sep 2020 | The Asset

Index provider MSCI has launched a tool to help investors assess their exposure and alignment to the United Nations Sustainable Development Goals (SDGs). The MSCI SDG Alignment Tool is designed to provide investors with a complete view of a company’s net contribution – both positive and negative – towards addressing each of the 17 UN SDGs.

The new product brings together MSCI’s framework covering over 8,600 equity and fixed income issuers, with analysis of the full range of a company’s operations, products, services, policies and practices, to evaluate its net contribution to addressing the global challenges the UN SDGs aim to tackle.

Says Remy Briand, head of ESG at MSCI:  “There is increasing demand from investors to channel capital to help deliver on these goals, but the fragmented data around the extent to which a company’s products and operations are aligned to a particular SDG remains an obstacle. Through this new tool we are seeking to provide an additional layer of transparency for investors to better assess the merits of claims put forth by their portfolio companies. With the target deadline for achieving the SDGs only a decade away, the standardization of that assessment is critical.”

Based on data from the new tool, MSCI found that across all 17 SDGs, 54 percent of the constituents of its All Country World Index were mostly aligned, meaning that they showed no strong misalignment on any of the SDGs and had more areas assessed as aligned than misaligned.

The framework behind the SDG alignment tool draws on publicly available information, rather than solely relying on companies' self-declared alignment with the goals, to provide a holistic view of alignment.

“We have found that companies can both overstate and understate their commitments to particular SDGs, which could undermine efforts by institutional investors to advance sustainable development,”  Briand notes. “Investors pursuing an impact investing approach could find that portfolio companies claim to support an SDG while being implicated in conduct that may belie that support. Conversely, some companies that fail to publicly commit to any SDG but may align with at least one of the goals may fall below the radar of impact investors seeking to target positive impact companies.”

The new tool allows investors to measure and report on the degree of SDG alignment in portfolios, develop SDG-themed investment products, comply with client mandates on the SDGs, identify companies that are better aligned with the SDGs, and meet the rising demand to channel capital towards addressing the objectives of the global goals, MSCI notes.

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