Impact Blog

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      By John Streur, President and CEO, Calvert Research and Management

      Washington - In the December issue of GreenMoney, you can read about what we think should happen in 2018 to propel Responsible Investing forward in an article appropriately called Urgent Needs for 2018.

      Aligning the capital markets more directly with the imperative to halt environmental destruction and reverse decades of worsening inequality must be our priority. In addition, it is essential that we develop the tools to strengthen our investment system, getting much more capital moving away from laggard companies into companies that can drive positive change, and to make systemic changes to raise the bar for all companies.

      Tool Number One: Data and Transparency

      We need to develop information systems that allow company management, consumers, regulators, the public and investors to have insight into the social and environmental impacts that companies are creating. Efforts are underway to create tools that can be leveraged to translate global norms into a framework that can be used to measure how responsibly businesses are operating.

      Calvert recently completed a case study with this goal in mind, linking the Sustainability Accounting Standards Board (SASB) materiality matrix with the United Nations Sustainable Development Goals (SDGs). SASB has developed a materiality-focused approach that aligns well with the investment research approach of Calvert, emphasizing sustainability issues that we believe will most impact a company's financial performance over the long term. The SDGs provide a similar, parallel framework for nation-states and national programming, which emphasize key development goals, the achievement of which is necessary to reach sustained, equitable, economic growth and prosperity for all citizens.

      Calvert's mapping exercise identified common themes between SASB Standards and the UN SDGs. We found that a substantial portion - 71% - of SASB metrics map to the SDGs and their related targets, which helps us to identify industries in which the SDGs are most likely to be financially material. This enables us to see a clearer path to investments most likely to achieve the SDGs and related positive societal outcomes, as well as those that may be better positioned to generate positive financial outcomes.

      In addition, initial assessment finds that 66 percent of SASB accounting metrics could be mapped, with varying degrees of exactness to ESG data vendor indicators. This insight brings to light the information gap that exists between an evolving corporate disclosure environment and traditional investor resources. It also highlights that, as the web of disclosure requirements and standards for corporations grows larger and more complex, finding commonalities between these standards can benefit companies and stakeholders by distilling what is most relevant and material.

      In addition to these efforts, company managements need to develop internal reporting tools in order to provide information that their teams can use, and investors and all other stakeholders can see, in order to drive change. These tools need to tie the specific sustainability efforts to financial impacts at the company.

      All the current efforts related to sustainability reporting are voluntary, and are not tied together in any coordinated manner. We need to coalesce around a set of standards and drive the development of information management systems to create the relevant data.

      Responsible investors also need this information in order to drive impactful corporate engagement. We need to spend more of our engagement time pressing for change, as opposed to asking for disclosure.

      To read the full article on GreenMoneyJournal.com, click here

      Bottom Line: One urgent need for Responsible Investing in 2018 is to develop tools that can be used to create a frawework to measure how responsibly businesses are operating.