Researchers have collaborated with asset managers to come up with a scientific framework to inform investment decisions that make positive contributions to sustainable environmental stewardship and human well-being.
The framework is the result of the work carried out by scientists at the City University of New York (CUNY) and Harvard University, in partnership with UBS Asset Management.
The research teams from CUNY and Harvard are testing this framework by analyzing the environmental and health benefits of a $2.1 billion portfolio of public equities managed by UBS Asset Management on behalf of PGGM, the Dutch pension fund. Four challenge areas are being considered: water, climate change mitigation, human health and food security.
The team leveraged recent advances in several scientific disciplines, including earth observation and modeling, epidemiology, and public health, and linked these data to corporate operational and financial data to show how products and services can contribute to more sustainable environmental and human systems.
The research suggests a new way to assess the sustainability of corporations for investors, who are increasingly interested in this investment approach. A key is to provide systematic, transparent, and verifiable metrics of success based on well-accepted scientific approaches, in contrast to the self-disclosure of beneficial actions that are claimed typically by companies themselves.
The paper lays out practical steps toward achieving this vision of investment in sustainability efforts outlined by the UN Sustainable Development Goals by proposing a formal dialogue space for information-sharing and best practices, that brings together the financial sector with auditors, corporate and nonprofit executives, and scientists.
For investors, this work provides an invaluable system to evaluate corporate practices, the impacts of which vary within the context of business operations in different regions and business sectors. Doing so allows for direct comparisons between companies — an important consideration when identifying how to make investments that have beneficial environmental and social impacts.
Collaborating with a global investment manager such as UBS Asset Management provided the researchers access to a portfolio with which they could analyze the performance of their proposed framework, giving real-world data rather than hypothetical modeling.