Officially launched in July this year, the Sustainable Development Investments Asset Owner Platform (SDI AOP) aims to standardize and create greater efficiencies for financial institutions looking to invest in the UN Sustainable Development Goals. Qontigo is acting as exclusive distributor to the SDI data developed by this initiative.
Off the conversation with APG’s Claudia Kruse and ahead of the September 10 webinar on this subject, we sat down with one of the four founding asset owners, Gert-Jan Sikking, Senior Advisor, Responsible Investment at PGGM, to discuss how this project came about and why they decided to share their insights with the world.
According to your website, your pension fund clients can ‘contribute to a liveable world’. What does that mean in practice?
Our roots are in the care and welfare sector – and together with our largest client, the Dutch pension fund Pensioenfonds Zorg en Welzijn (PFZW) – we represent the financial future of people who work in this sector. We believe that tackling ESG challenges is key to realizing our ambition to ‘contribute to a liveable world’. So, for many years, the management of ESG sustainability risks has been an integral part of our investment analysis and we use this analysis to decrease the sustainability risks of the companies and projects we invest in.In addition we look, together with our clients, for opportunities where we can increase our investments in companies and projects that also have a positive contribution, through their products and services, to global sustainability challenges – for example, climate change, healthcare, water and food security.
We constantly hear ESG, Sustainable Development Goals and Sustainable Development Investments being batted around – are they all the same thing?
No. It’s important to make the distinction among those three terms. ESG relates to the internal activities within a company and SDI relates to the products and services the company offers. SDGs are the UN’s 17 interconnected goals that are the ‘blueprint to achieve a better and more sustainable future for all’. However, ESG warning flags are included in the SDI taxonomy to support the integration of ESG in individual investors’ investment decision-making.
How did the SDI AOP come about?
There’s a lack of quality, standardized data and definitions when it comes to investing with a positive contribution to global sustainability challenges. When the UN Sustainable Development Goals were introduced in 2015, we decided that this was the right time to develop a standard that could be used to help classify our investments. We got together with APG – the other large Dutch pension provider – to define this Sustainable Development Investment SDI Taxonomy.
Why did PGGM and APG start this initiative? ?
I think APG sums it up pretty well: “What good will a great pension do when the world around you has become unliveable?” Both of our companies have a firm commitment to the future of our beneficiaries and, really, the world. We see more and more asset owners and financial institutions aligning their investment portfolios towards the SDGs, so we decided with APG to create the SDI Asset Owner Platform. By developing an SDI standard, we can create cost-efficiencies for other asset owners so that they do not have to “reinvent the wheel” when they want to link their portfolio to the SDGs. But ultimately, it’s important that risk-return characteristics the investments are contributing to our pension ambitions – and importantly, we both believe that contributing to a sustainable future and delivering performance are not goals that are mutually exclusive.
How long did this project take?
We spent the last two years mapping out the total investment portfolio of our clients towards the SDGs, using the SDI taxonomy that we developed. We analyzed all investible SDGs and defined when a company has a positive contribution – all through the lens of products and services (solutions). We then decided to work with Entis as our data science partner to create objective and consistent data on the SDG contributions of companies. A few months ago we welcomed AustralianSuper and British Columbia Investments to the platform, and selected Qontigo as the exclusive distributor of this data and officially launched the SDI AOP.
Is it true that the SDI taxonomy is publicly available?
It’s important to us that we are transparent – we’re not developing this data in a black box. We want to share our knowledge and experience in analyzing investment portfolios in detail – having worked on this project intimately for the last two years. The SDI taxonomy is an open-source document that we published so that other financial institutions could also use it as a framework to invest in line with the SDGs.
So what next for PGGM and the SDI AOP?
We started with analyzing listed equities and will extend the universe to include bonds in the future. We will continue to increase coverage of companies covered from 8,000 to 10,000 next year. We are also working on forward-looking metrics and private market classifications. The next step would be defining metrics to be able to report on real world outcomes. As the industry is moving towards more transparency about how investment portfolios can contribute to solutions for global challenges, we are very excited about what’s to come.
PGGM is the Dutch pension fund manager and administrator managing over EUR 230bn of public and private assets for pension fund clients. Register now for the September 10 webinar, ‘How to invest in the UN Sustainable Development Goals (SDGs)’.