BlackRock's Crozat on SDGs' impacts, data and integration

Monde
On the 07/01/21 at 7:51AM

by

Adrien Paredes-Vanheule

Three questions to Carole Crozat, head of fundamental research at BlackRock Sustainable Investing, on BlackRock's latest report on the overlap between sustainable development goals and SASB indicators.
Carole Crozat

Asset News: Other SDG-focused studies have raised the point that some may cause harm to the environment or forests. Can investing according to the SDGs also lead to negative impacts for the environment in your view?

Carole Crozat: The whole point of the Sustainable Development Goals (SDGs) is to lead to better human development, while preserving the environment, and that is why they must be addressed in their entirety.

However, we can see that progress on certain objectives is uneven, with more accumulated delay, in particular on those related to the protection of biodiversity and inequalities. Globally, we see it in France, but also everywhere else: for example, we are still far from the right path for reducing greenhouse gas emissions, whether for 2030, as an intermediate objective, or for carbon neutrality in 2050.

A very significant reallocation of capital is necessary to reach them. At the same time, the number of investors looking at the UN SDGs as a frame of reference is constantly increasing.

It's about finding a balance and keeping the whole framework in mind. Thus, to avoid prioritising one goal over another, we encourage investors to look at the entire value chain, and not just the products and services provided. We encourage investors to take a holistic view that takes into account both the positive contributions and the negative impacts a business can have on all of the SDGs.
 
How to overcome the lack of data available for certain SDGs?
 
Overall, the reliability and availability of ESG data and analysis are a major concern for investors. This can prove to be a major obstacle to the adoption of sustainable investing.
 
The study we conducted takes a dual materiality approach - both financial and sustainability - to tackle this problem and prioritise the most relevant indicators for companies to communicate. On the one hand, we are convinced that approaching the question of this data in a sectoral way is more effective in obtaining the desired information.

It allows investors to focus on the points that can make a real difference, both from the perspective of contributing to the SDGs, but also from the perspective of long-term profitability. Our research clearly identifies these factors for each of the 77 economic sectors of the SASB benchmark.

In particular, we have identified some SDGs on which information is less available. These include, for example, the management of and access to water, clean energy at affordable cost and enabling everyone to live in good health and promoting the well-being of all at all ages. In order to support them, through our shareholder engagement and investment activities, we draw the attention of companies to the fact that it is essential that they communicate in a more coherent and systematic manner on these issues.

What conclusion do you draw from the fact that only four SDGs represent 55% of the SASB indicators?
 
Overall, we found a very high correlation, reaching 70%, between the 980 financially significant sustainability indicators identified by the Sustainability Accounting Standards Board ("SASB") and the UN's 242 national SDG indicators. Among these 70%, a majority focuses on four SDGs.
 
In order to integrate the SDGs into an investment strategy, it is necessary to target the most relevant. Particularly high concordances regarding water management and access, sustainable economic growth, affordable clean energy, sustainable consumption and production are strong opportunities.

These indicators are relevant and material for a very large number of sectors because they include cross-cutting issues. Moreover, as investors, these objectives are a priority because they are particularly actionable levers for companies. The involvement of the private sector is therefore all the more important to achieve these objectives.

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