Applying pioneering technology, APG and PGGM are taking the next step in developing a common approach for investments that contribute to the UN Sustainable Development Goals (SDIs). They will establish a platform, which will build on the infrastructure APG has developed with its data scientists team Entis. “Together, we are leading the way on sustainable investing and Artificial Intelligence-driven technology”, says Claudia Kruse, Managing Director, heading up APG’s Global Responsible Investment & Governance team.
What is the SDI Asset Owner Platform?
“The SDI Asset Owner Platform allows asset owners to connect around a shared objective of understanding to what extent their portfolio investments contribute to the UN Sustainable Development Goals (SDGs). These goals, set by the United Nations in 2015, aim for a better, livable world. For example by building more sustainable cities and generating more clean energy. The SDI Asset Owner Platform provides a common definition, taxonomy and data source for investments into the SDGs, offering insights that can be used by investors to analyze, select and engage with their worldwide investments.”
Why is this important?
“An increasing number of global asset owners and institutional investors aim to understand the contribution they make, through their investments, to the SDGs. Now, APG and its likeminded partner PGGM have joined forces with the goal of creating a critical mass of asset owners who together define what it means to be investing in the SDGs. These insights can be integrated into the investment process, and also allow investors to shift more capital to SDIs. Speaking a common language improves engagement with companies and eventually should drive more meaningful disclosures by companies, too. As asset owners report on the same basis on their investments into the SDGs, their disclosures become comparable and provide stakeholders with more transparency.”
What powers this platform?
“In 2018 APG took over the data analytics team from Deloitte and established the company Entis. The team had successfully applied its technical infrastructure and smart algorithms to identify investments that contribute to solutions to the important global challenges. In 2018, APG then asked Entis to apply this specifically to the UN Sustainable Development Goals, in line with the SDI taxonomy published jointly with PGGM in 2017. The taxonomy is supported and used by several other investors like CBUS. In less than a year, by the end of 2018, the Entis team analyzed an investment universe of some 10,000 global listed companies and identified the SDIs among them. Using artificial intelligence and big data allows investors to assess very large numbers of investments on their contribution to the SDGs and integrate this information into their investment process.
How does the SDI Asset Owner Platform relate to the responsible investment goals of APG and its clients?
“Our largest client ABP, the € 430 billion Dutch civil servants pension fund, in 2015 set the target to double its investments in the SDGs to € 58 billion by 2020. Another client, Dutch builders pension fund bpfBOUW, also set a target of € 12 billion. It is therefore crucial that we can identify Sustainable Development Investments. They always have to meet our clients’ financial risk and return requirements from the outset ”
How does the SDI classification assess an investment’s contribution to the SDGs?
“The SDI classification measures how much of the business relates to products and services that contribute to SDGs. It is based on relevant financial or operational metrics, for example revenue and capital spending, as well as contextual information. Looking ahead, we have the ambition to develop metrics that give insight not only into how much we invest into companies that contribute to the SDGs and to which ones, but also into the outcomes those companoes have achieved. An Example is the number of people provided with access to financial services.”
How does the SDI Asset Owner Platform link with other external reference frameworks?
“The SDI taxonomy considers established standards an important source and reference and will make use of them where suitable. Importantly, the SDI Asset Owner Platform is global in nature and hence takes a global view across all SDGs.”
What is to happen next?
“With APG and PGGM joining forces to establish the SDI Asset Owner Platform, the SDI framework is gaining traction and leading the way as to how institutional investors can contribute to the UN Sustainable Development Goals. Together we will offer this pioneering approach to likeminded institutional investors across the globe, and welcome them to join the SDI Asset Owner Platform.” We feel strongly supported by other asset owners, such as for example Australia’s leading building and construction pension fund who has adopted the SDI framework and the Universities Superannuation Scheme from the UK who will work with the SDI AOP in assessing its exposure to and support for the SDGs”.
Read the press release here.