Beyond Alpha Report Explores Why Institutional Investors Need To Do More To Support the Sustainable Development Goals

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Beyond Alpha publishes new research report: “We Need to Talk: Why It’s Necessary for Institutional Investors to Embrace SDG-Aligned Investing”

In the five years since the SDGs were first introduced, there has been a concerning lack of understanding and acceptance of these goals by most institutional investors.

Beyond Alpha, a specialized research and consulting firm focused on helping institutional investors and intermediaries align their investment models with social and environmental outcomes, today published a new report on sustainable investing that calls for a more holistic approach that takes both positive and negative impacts into account. The full report, “We Need to Talk: Why It’s Necessary for Institutional Investors to Embrace SDG-Aligned Investing,” is available at http://www.beyondalpharesearch.com.

Written by experts and practitioners in sustainable investing, the report recommends the widespread adoption of a niche but emerging approach to sustainable investing that they call ‘SDG-Aligned Investing.’ The authors define SDG-Aligned Investing as “a system-level investment approach that takes into consideration both the risk and return characteristics of an investment, including environmental, social and governance (ESG) aspects, as well as the positive and negative impacts of that investment in the achievement of the SDGs.”

The authors argue that this holistic approach to investing can solve the shortcomings of current approaches to sustainable investing, like ESG integration and impact investing, which have largely failed to deliver meaningful progress towards urgent social and environmental challenges as defined by the UN’s Sustainable Development Goals (SDGs).

“In the five years since the SDGs were first introduced, there has been a concerning lack of understanding and acceptance of these goals by most institutional investors,” said Mirtha Kastrapeli, founder and CEO of Beyond Alpha and a Fellow at Columbia University’s Center for Sustainable Investment (CCSI). “Institutional investors, including both asset managers and asset owners, have a unique opportunity and responsibility to their clients and beneficiaries to do more to address urgent social and environmental challenges.”

An SDG-Aligned Investing approach would require investors to meet a higher bar of Conviction, Clarity, and Consensus in their investment decisions.

  • Conviction that the SDGs are interconnected and indivisible and that their achievement will strengthen the shared social and environmental systems and create long-term value and resilient markets for generations to come.
  • Clarity of both definition and impact. Clarity of definition is having a clear and honest understanding of what current sustainable investment strategies do, and do not do, concerning the achievement of the SDGs. Clarity of impact is understanding that all investments have an impact, and therefore it is necessary to analyze both the positive and negative externalities of portfolios’ underlying holdings towards the achievement of the SDGs.
  • Consensus among investors on what’s expected from companies concerning SDG alignment. This type of agreement is paramount to amplify the impact that investors can have on companies’ actions and, consequently, on shared systems.

“We recognize that the adoption of SDG-Aligned Investing won’t happen overnight,” said Kastrapeli. “However, we think there are important steps that institutional investors can take to better account for the total impact--both positive and negative--of their portfolios. These steps include reconsidering how they allocate capital via tools like guardrails and public-private partnerships, as well as how they engage with companies to encourage business leaders to improve their sustainability practices.”

The research team gathered input for the report from more than 40 interviews with asset owners, asset managers, and thought leaders from around the world. The researchers were supported by an advisory board of leading industry organizations and academics, including representatives from CFA Institute, The Investment Integration Project (TIIP), and The Shareholder Commons (TSC).

About Beyond Alpha

Beyond Alpha LLC is a specialized research and consulting firm that focuses on helping institutional investors and intermediaries adopt investment models that target social and environmental outcomes, in addition to traditional market outperformance. We believe such an approach will better position these investors for long-term success. Learn more at http://www.beyondalpharesearch.com

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Dmitriy Ioselevich
17 Communications
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