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UN Sustainable Development Goals: How Companies Stack Up

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Sustainable Development Goals

Sustainable Development Goals

The UN SDGs: How Companies Stack Up

Environmental, social, and governance (ESG) investing witnessed a breakthrough year in 2020 with the most fund inflows on record.

Importantly, for companies that are judged according to ESG metrics, one way to track their progress is through their alignment to the UN Sustainable Development Goals (SDGs).

Established in 2012, the UN SDGs are a blueprint for creating a more sustainable future by 2030 that have been adopted by 193 countries worldwide.

As investors and stakeholders pay closer attention to sustainability concerns, this graphic from MSCI breaks down how companies stack up according to their alignment to the UN SDGs.

How Were Companies Measured?

To track companies net contribution to the UN SDGs, companies were scored by their positive or negative contribution to each of the 17 goals.

The 17 UN SDGs are designed to achieve three primary objectives by 2030:

  • Protect the planet
  • End poverty
  • Create prosperity and peace for all

Specifically, the framework centers on a discussion paper that was developed in partnership with the OECD in 2018. Company policies, operations, products and services, and practices are analyzed according to reported and publicly available information.

Tracking the Alignment of Companies

Across a universe of 8,550 companies in the MSCI All Country World Index, constituents were measured from strongly aligned to strongly misaligned to the UN SDGs.

Sustainable
Development Goal
Strongly
Aligned
AlignedMisalignedStrongly
Misaligned
1No Poverty089215532
2Zero Hunger24234300
3Good Health and Well-being031514129
4Quality Education831520
5Gender Equality0109290
6Clean Water and Sanitation173253610
7Affordable and Clean Energy43639109587
8Decent Work and Economic Growth2512695217
9Industry, Innovation, and Infrastructure688441379
10Reduced Inequality082812731
11Sustainable Cities and Communities0016719
12Responsible Consumption and Production115855150598
13Climate Action2759495587
14Life Below Water03615192
15Life on Land0012817
16Peace and Justice Strong Institutions013524127
17Partnerships to Achieve the Goal040115222

Source: MSCI ESG Research LLC as of August 11, 2020

Broadly speaking, companies fell mostly in the middle—roughly 38% were aligned while almost 55% were misaligned or neutral. Meanwhile, just 0.2% of companies were strongly aligned to the UN SDGs.

Overall, one of the most strongly aligned goals was Responsible Production and Consumption, with 115 companies meeting this criteria. Specifically, these include companies that are building sustainable infrastructure, energy efficiency, or creating green jobs.

Interestingly, the worst performing goal was also Responsible Production and Consumption, with over five times as many companies (598) strongly misaligned. Along with this goal, both Climate Action and Affordable and Clean Energy each had over 500 companies strongly misaligned.

UN SDGs: A Sector Focus

Unsurprisingly, SDG-alignment varied widely according to company sectors.

Educational companies, for instance, represented the highest level of alignment to Gender Equality. Meanwhile, 18% of 425 utilities companies assessed ended up aligning with Clean and Affordable Energy goals.

As one would expect, the energy sector lagged behind. In 2020, fossil fuels were a key source of revenue for 91% of the companies in the energy business. In fact, just three companies derived over 50% of their revenues from green alternatives: REX American Resources, Renewable Energy Group, and Verbio.

A Call to Action?

Despite the growing wave of interest in ESG investing, the reality is that progress to meet the UN SDGs has been slower going than expected.

However, a greater number of individuals, stakeholders, and activists are sounding the alarm. Today, over 3,000 signatories representing trillions in assets under management have committed to the UN Principles of Responsible Investment, which has established six key actions for ESG investing. Now, many companies are required to report their ESG disclosures in Europe.

Along with these key markers of progress, investors can move the dial by tracking a company’s alignment to sustainable development goals.

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Investor Education

Fact Check: The Truth Behind Five ESG Myths

ESG investing continues to break fund inflow records. In this infographic, we unpack five common ESG myths.

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ESG Myths

Fact Check: The Truth Behind 5 ESG Myths

In 2021, investors continue to embrace environmental, social, and governance (ESG) investments at record levels.

In the first quarter of 2021, global ESG fund inflows outpaced the last four consecutive quarters, reaching $2 trillion. But while ESG gains rapid momentum, the CFA Institute shows that 33% of professional investors surveyed feel they have insufficient knowledge for considering ESG issues.

To help investors understand this growing trend, this infographic from MSCI helps provide a fact check on five common ESG myths.

1. “ESG Comes at the Expense of Investment Performance”

Fact Check: Not necessarily

Worldwide, ESG-focused companies have not only seen higher returns, but stronger earnings growth and dividends.

Returns by ESG RatingsEarnings Growth*Active Return**Dividends and Buybacks
Top tier2.89%1.31%0.28%
Middle tier1.35%0.12%-0.02%
Bottom tier-9.22%-1.25%-0.05%

Source: MSCI ESG Research LLC (Dec, 2020)
*Contribution of earnings growth and dividends/buybacks to active return
**Active return is the additional gain or loss compared to it respective benchmark

In fact, a separate study from the CFA Institute shows that 35% of investment professionals invest in ESG to improve their financial returns.

2. “Investors Talk About ESG But Don’t Invest In It”

Fact Check: False

Global ESG assets under management (AUM) in ETFs have grown from $6 billion in 2015 to $150 billion in 2020. In just five years, ESG AUM have accelerated 25 times.

Today, money managers are focusing on the following top five issues:

Top ESG IssuesAssets AffectedGrowth in Assets Affected (2018-2020)
Climate change / carbon emissions $4.18T39%
Anti-corruption$2.44T10%
Board issues$2.39T66%
Sustainable natural resources / agriculture$2.38T81%
Executive pay$2.22T122%

Source: US SIF Foundation (Nov, 2020)

Meanwhile, over 1,500 shareholder resolutions focused on ESG-related matters were filed between 2018-2020. Not only are investors turning to ESG assets, but they are placing higher demands on corporate responsibility.

3. “ESG Investment Strategies Eliminate Entire Sectors”

Fact Check: Not necessarily

First, not all ESG investment approaches are exclusionary.

For instance, in North America roughly 51% of ESG ETFs used an ESG integration approach as of Dec. 31, 2020. In an ESG integration approach, ESG risks and opportunities are analyzed with the goal to support long-term returns.

By comparison, values and screens approaches, which accounted for over 22% of ESG ETFs in North America may screen out specific business activities, such as alcohol or tobacco, or sectors such as oil & gas.

Percentage of ESG TypeIntegrationValues & ScreensThematicImpact
North America50.9%22.5%20.7%5.9%
Asia57.8%34.6%3.8%3.8%
Europe30.8%60.6%8.6%0.0%
Australia28.6%71.4%0.0%0.0%

Source: Refinitiv/Lipper and MSCI ESG Research LLC as of Dec 31, 2020 (MSCI Feb, 2021)

Second, companies are assessed on a sector-specific basis where ESG leaders and laggards are identified within each sector in comparison to peers. In other words, ESG doesn’t mean eliminating exposure to entire sectors. Instead, investors can choose from a range of companies based on their ESG ratings quality.

4. “ESG Investing Is Only For Millennials”

Fact Check: False

Although ESG is popular among millennials, ESG investing is being driven by the entire investor population. In 2019, one study finds that 85% of the general population expressed interest in ESG investing.

Interest in Sustainable InvestingGeneral PopulationMillennials
201985%95%
201571%84%

Source: US SIF Foundation (Nov, 2020)

Sustainable investing goes far beyond millennials—ESG disclosures are quickly becoming requirements for key industry participants, such as institutional investors and listed companies.

5. “ESG Investing is Here to Stay”

Fact Check: True

Climbing 28% in 2020 alone, over 3,000 signatories have committed to the UN Principles of Responsible Investment. As of the first quarter of 2021, 313 global organizations and 33 asset owners have been newly added.

Growth of UN PRINumber of Signatories*AUM Represented
20203,038$103.4T
20192,370$86.3T

Source: UN PRI
*As of Mar, 2020

Central to ESG’s growth is the availability of ESG investments. ESG investing has become more widely accessible—which wasn’t always the case. Over the last decade, the global number of ESG ETFs has grown from 46 to 497.

Why the Facts Matter

As ESG investments continue to play an even greater role in investor portfolios, it’s important to focus on data rather than prevailing ESG myths that are not backed by fact.

Given the recent momentum in investment returns and ESG adoption, data-driven evidence empowers investors to build more sustainable portfolios that better align with their investment objectives.

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Misc

Visualizing the Depth of the Great Lakes

The five Great Lakes account for 21% of the world’s total freshwater. This bathymetric visualization dives into just how deep they are.

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Visualized: The Depth of The Great Lakes

Click here to view the interactive version of the visualization on Tableau.

As the seasons change, it’s natural to want to enjoy the outdoors to the fullest. The Great Lakes, a distinct geographical region sandwiched between the U.S. and Canada, provides immense opportunity for millions of tourists to do just that every year.

But did you know that altogether the Great Lakes contain 21% of the world’s surface freshwater by volume—or 84% of the surface freshwater in North America?

This bathymetric visualization, created by Alex Varlamov, helps put the sheer size and depth of all five of the Great Lakes into perspective.

What is Bathymetry?

Bathymetry is the study of the underwater depth of ocean or lake floors, a geographical science that falls under the wider umbrella of hydrography.

In essence, it is the underwater equivalent of topography. Contour lines help to represent and study the physical features of bodies of water, from oceans to lakes.

Most bathymetric studies are conducted via sonar systems, transmitting pulses that ‘ping’ off the ocean and lake floor, uncovering what lies below.

The Depth of the Great Lakes, Compared

High on the list of the world’s largest lakes, the five Great Lakes altogether account for over 244,700 km² (94,250 mi²) in total surface area. That’s bigger than the entire United Kingdom.

Lake Superior emerges, well, superior in terms of total surface area, water volume, and both average and maximum depth.

 Surface areaWater volumeAverage depthMaximum depth
Lake Ontario19,000 km²
(7,340 mi²)
1,640 km³
(393 mi³)
86 m
(283 ft)
245 m
(804 ft)
Lake Erie25,700 km²
(9,910 mi²)
480 km³
(116 mi³)
19 m
(62 ft)
64 m
(210 ft)
Lake Michigan58,000 km²
(22,300 mi²)
4,900 km³
(1,180 mi³)
85 m
(279 ft)
282 m
(925 ft)
Lake Huron60,000 km²
(23,000 mi²)
3,500 km³
(850 mi³)
59 m
(195 ft)
228 m
(748 ft)
Lake Superior82,000 km²
(31,700 mi²)
12,000 km³
(2,900 mi³)
147 m
(483 ft)
406 m
(1,333 ft)

Lake Erie is by far the shallowest of the lakes, with an average depth of just 19 meters (62 ft). That means on average, Lake Superior is about eight times deeper.

With that in mind, one drawback of the visualization is that it doesn’t provide an accurate view of how deep these lakes are in relation to one another.

For that, check out this additional visualization also created by Alex Varlamov, which is scaled to the same 20 meter step—in this view, Lake Erie practically disappears.

More than Meets the Eye

The Great Lakes are not only notable for their form, but also their function—they’re a crucial waterway contributing to the economy of the area, supporting over 50 million jobs and contributing $6 trillion to gross domestic product (GDP).

Together, the five Great Lakes feed into the Atlantic Ocean—and when we expand the scope to compare these lakes to vast oceans, trenches, and drill holes, the depth of the Great Lakes barely scratches the surface.

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