Pensions for Purpose has undertaken research on firms who can map pension fund portfolios to the Sustainable Development Goals (SDGs), and has published an overview of the findings.Pensions for Purpose have been facilitating discussion sessions with pension funds to help them articulate a set of responsible investment beliefs and, as part of this, many choose to prioritise certain SDGs in their investment strategies. For these funds, the next step has been to assess how well their existing portfolio maps to those goals so that they can then demonstrate improvements over time, as they begin to align their investment strategy more closely to their sustainable investment beliefs.
Pension funds were coming to Pensions for Purpose for guidance on which firms could map to the SDGs, and as a result, we decided to undertake high level due diligence on organisations who had indicated that they had this capability. The detailed analysis was undertaken by an Associate of Pensions for Purpose, Naureen Khan, and we are extremely grateful for the many hours of work that she completed, to bring this report to fruition.
15 firms responded to our Request for Information and these firms have been included in our analysis. We also spoke to several framework providers. A further five firms agreed to a meeting with us to discuss their capability, but we had not received a response to our written “Request for Information” by the deadline requested. We also had several enquiries after the deadline, which means that we are likely to update this research over time as more providers make themselves known to us.
According to the research, there were four groups of providers offering SDG mapping: fund managers, consultants, specialist analytics firms and framework providers.
There was a wide variation in the methodologies used by providers to map portfolios to the SDGs. Some focus purely on revenue-mapping, others consider the governance and operations of the underlying companies as well.
All providers were able to map to listed equities, 75% were able to map fixed income portfolios, but only 40 per cent had that capability in private assets.
Two-thirds of the firms said they would map to all 17 goals. Others excluded goals that were harder to map to, such as SDG 16 (Peace, Justice and Strong Institutions) and SDG 17 (Partnerships for the Goals).
Tenure of experience in SDG mapping was, on the whole, limited. Pricing of services was variable, with a wide range in sample pricing quotes for a GBP500 million pension fund portfolio. We expect pricing to become more competitive as experience grows and as more firms begin to offer this capability.
Reporting tends to range from a simple listing of the SDG alignment in the portfolio to more visual spider charts.
The challenges that were most frequently mentioned were around quality of data, mapping financial data to all the SDGs, private markets and taking negative contributions into account.
Karen Shackleton says: “This has been an insightful piece of research and I hope our directory is of some help to pension funds who are looking for providers to undertake a mapping exercise. We were grateful for the time and effort put in by all the firms that we have engaged with over the past two months, notwithstanding the impact of lockdown restrictions that they were dealing with. It is clearly an area of growing interest and I expect the number of providers, as well as the interest from pension funds, to grow rapidly over the next year. SDG mapping allows pension funds to communicate progress towards their responsible investment beliefs effectively, to both members and the wider community.”