MSCI launches sustainable development goals alignment tool

On the 09/16/20 at 11:00AM


Adrien Paredes-Vanheule

Companies covered by MSCI will be rated for each of the United Nations Sustainable Development Goals on a scale from Strongly Aligned to Strongly Misaligned.

Global index provider MSCI has unveiled a tool helping investors to align with the 17 United Nations Sustainable Development Goals (UN SDGs). The tool uses MSCI's coverage of 8,600 equity and fixed income issuers and provides investors with a view of companies' positive and negative net contributions to addressing environmental, social and governance challenges encompassed by the SDGs. Hence, companies are rated for each of the UN SDGs on a scale from Strongly Aligned to Strongly Misaligned.

Furthermore, MSCI's alignment tool provides assessments on two dimensions – product alignment and operation alignment – for each company and for each of the 17 goals. The index provider specified that its framework goes beyond companies' self-declared alignment statements with the goals by digging into publicly available information.

Rémy Briand, head of ESG at MSCI, stressed 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.” He added: “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.”

Research carried out by MSCI outlined that 54% of the MSCI All Country World Index constituents were mostly aligned across all 17 SDGs. The company said this means no strong misalignment on any of the SDGs and more areas assessed as aligned than misaligned.

Decent work and economic growth, which forms the SDG 8, had the highest degree of alignement whereas goals 7 (clean energy), 12 (sustainable consumption and production) and 13 (climate action) had the highest percentage of companies (8%-9%) misaligned with the goals, primarily because of their continuing reliance on fossil fuels.

“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. 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,” Briand commented.

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