Study reveals 70% match between SDGs and SASB material indicators
The clock is ticking for the integration of the United Nations-supported sustainable development goals (SDGs) in investors’ portfolios. 2030 has been set as deadline for the achievement of the objectives set by the 17 SDGs and their 242 sub-targets, aimed at improving life across the globe in many areas, from reducing inequalities to building sustainable communities around the world.
In a study published on Thursday, the world’s largest asset management company BlackRock assessed SDGs through the prism of financial materiality. Hence, it compared the 242 UN SDG indicators with the 980 financially material sustainability indicators identified by the Sustainability Accounting Standards Board (SASB).
The investment manager concluded to “a significant overlap” between the SDGs and company indicators that are material to long-term financial performance. BlackRock estimated the match at 70%. In total, 687 out of the 980 SASB indicators would correspond to at least one of the 242 UN SDG indicators, BlackRock said.
The US manager added the matching level was “especially high” in the environment , business model & innovation, and human capital categories, which are directly relevant to the climate change, responsible production and consumption, sustainable construction, and waste management goals.
Sector-wise, sectors with the highest match of material indicators linked to SDG indicators are extractives and minerals processing (120) and infrastructure (107). “The leading UN SDGs for these sectors are Clean Water and Sanitation (SDG 6), Affordable and Clean Energy (SDG 7), Climate Action (SDG 13), and Decent Work and Economic Growth (SDG 8). This is largely due to these sectors’ high correspondence with material indicators under the Environment and Business Model & Innovation categories, which tells us that the performance indicators linked to these UN SDGs will be particularly pertinent to the financial performance of these sectors,” the manager said in the report.
Conversely, financials and services sectors get the lowest matches with 28 and 25 SASB indicators related to a SDG. The reason is that the majority of their material indicators dwell in the Social Capital, Human Capital and Leadership & Governance categories, all having a low correspondence to the UN SDGs.
Financial materiality expressed mostly in four SDGs
BlackRock also found out four out of 17 SDGs draw 55% of all SASB materiality indicators that map to the SDGs. These are namely Clean Water and Sanitation (SDG 6), Decent Work and Economic Growth (SDG 8), Affordable and Clean Energy (SDG 7) and Responsible Consumption and Production (SDG 12).
The manager also split SASB material indicators into three categories: positive contributions, negative externalities, and risk management. It said most of the 980 SASB indicators pertain to company risk management (52%) and the minimisation of negative externalities like greenhouse gas emissions (38%). The remaining 10% pertain to positive contributions.
Said Carole Crozat, head of fundamental research at BlackRock Sustainable Investing, companies will increasingly have to improve their transparency on issues pertaining to SDGs. “Focus will be where the information is linked to financial materiality, and we anticipate regulatory forces will likely introduce some requirements for companies to improve their disclosures and management of their social and environmental impact,” she added.