For investors looking to incorporate environmental, social and governance (ESG) factors into their portfolios, the United Nations’ sustainable development goals provide an entry point.
“As ESG investing is maturing, I think people are going to […] pay more attention to how they can fulfill some of those goals that have been established by the United Nations,” said Dominique Barker, portfolio manager and senior analyst of equities at CIBC Asset Management, during a mid-September interview.
Emerging from the 2012 UN Conference on Sustainable Development in Rio de Janeiro, the 17 goals address global challenges from hunger to climate change. They were adopted by 193 countries, including Canada, in 2015.
The challenge going forward is there are going to be a lot of grey areas once investors start looking at individual companies through the lens of the development goals, Barker said.
Take Nutrien, the fertilizer giant based in Saskatoon whose slogan is “Feeding the future.” The company could be a choice for investors looking to address the UN goal to solve hunger, she said.
“The problem is it also receives a negative score for other sustainable goals, such as clean water and sanitation, or life on land,” Barker said.
“It becomes a challenge for portfolio managers like myself as we start to measure what these companies are doing on the positives and then how it is outweighed on the negatives. Hopefully you end up with a positive outcome at the end.”
On its website, Nutrien emphasizes its efforts in relation to the UN goals: “By offering products and services that help growers increase crop yields in an environmentally responsible way, we impact the security of the world’s food supply,” the company says.
Another “grey area” for Barker is natural gas. It’s a “great bridge fuel” as we transition to electric vehicles, she said, but it has some “negative attributes,” too, such as creating carbon emissions.
Because of the scope of problems addressed in the 17 goals, it’s easy to see how investments could support one goal while failing to live up to another.
Investors can find resources related to investing based on the UN’s development goals at the Principles for Responsible Investment, a responsible investment proponent supported by the UN.
Read about the 17 UN Sustainable Development Goals here.
This article is part of the AdvisorToGo program, powered by CIBC. It was written without input from the sponsor.