As the sustainability landscape continues to grow and change, there is a pressing need for evolving data that helps investors to better understand the sustainability outcomes associated with their investments. The Sustainable Developments Investment Platform (SDI AOP) has set out to address this, with continuously growing datasets updated quarterly, to assess companies’ contributions to the UN Sustainable Development Goals.
We sat down with James Leaton, Research Director of the SDI AOP, to discuss the latest platform developments led by its asset-owner led community.
Can you outline what’s new for this September release?
There are four areas to highlight:
- Thematic tagging: We know that investors are thinking about key themes such as climate, biodiversity and the circular economy, so we have made it easier to identify revenues linked to these themes with our new tagging approach. This gives investors another lens with which to view their portfolio, rather than just the UN SDG lens.
- The circular economy: Our framework already captures many circular products/services, such as recycling activities, sustainable product alternatives and Product-as-a-Service offerings. Our enhanced approach ensures that emerging revenue streams from new approaches such as closed-loop production systems, will also be captured as they become material for companies in our universe.
- Emerging market banks: Data on the exposure of banks is notoriously difficult to find. The first area we are addressing is to assess the loanbook exposure of emerging market banks dedicated to serving micro, small and medium enterprises and underserved groups. This activity plays a critical role in the economic development of these countries.
- Real Estate: Over the last three years, we have expanded coverage across equities and fixed income, and now we are adding publicly listed Real Estate Investment Trusts (REITs). The initial data relates to social aspects, identifying those REITs which are aligned to Healthcare (SDG 3) and Education (SDG4).
What’s keeping asset owners up at night, and how is the data helping to alleviate those concerns?
The SDI AOP is not only a data provider. We have built a community of asset owners and asset managers and have regular sessions where users can share their challenges and contribute to the development of the solutions. Greenwashing and Greenhushing concerns are top of mind for many, as they seek to ensure the validity of their sustainable investment approach and effectively communicate to beneficiaries on how they are delivering for them. The credibility of the framework, the quality of the processes applied, and the transparency of the raw data all help users capably demonstrate they are doing what they say they are.
Making data truly useful requires a lot of research and development. Can you outline some of the hurdles you’ve come across and your approach to this latest release?
Investors always want to be ahead of the game, but it can be difficult to predict areas of growth. However, working with the asset owners who are active across asset classes gives us insights we can cross-fertilize in the SDI data. For example, new sustainable technologies may appear first in speciality private companies, and we will want to capture these in our revenue data, as larger companies enter those markets or acquire the private companies.
This also feeds into defining nascent technologies we want to include in our SDI Innovation Outlook data, which identifies the companies that are filing patents in innovative sustainability solutions. The thinking behind this is that the resulting data gives an indication of how a company’s own R&D will contribute to the UN SDGs through future offerings.
Since the launch of the SDI AOP three years ago, are you seeing a shift in the way your subscribers are using the data – or thinking about the data?
We see huge variety in how people are using the data, which is reflective of the flexibility we provide to meet a user’s needs. Now that we have several years of data, people can see where the growth is, or where transitions are occurring in companies over time. The use cases range from company engagement to index construction to universe definition to reporting.
What can we expect to see next?
The SDI taxonomy continues to iterate. It is not a static framework but evolves to capture the latest thinking and acts as the backbone of what we are doing. We are looking at more ways to apply it, utilizing the artificial intelligence capabilities at our disposal. For example, our users want to have more granularity in terms of the markets being served by products and services, the types of products and the outcomes resulting from them. This is an area of focus for us to meet the future needs of the investor community.
