SDG taxonomies

The largest pension fund in the U.S., the California Public Employees’ Retirement System (CalPERS), is studying how the UN Sustainable Development Goals (SDGs) can be integrated into its $357 billion (U.S.) investment portfolio. CalPERS has long been seen as a trendsetter on environmental, social and governance issues.

In late 2015, the United Nations adopted the SDGs, a set of aspirations for the world to realize by 2030. This set of goals, targets and indicators is intended to frame global efforts to end poverty, protect the planet and ensure prosperity for all.

Estimates vary on how much investment will be required to meet the 2030 targets but tend to fall within a range of $2 trillion to $3 trillion a year of public and private money.

The SDGs present an enormous business opportunity for businesses and investors, with one report by the Business and Sustainable Development Commission concluding that the SDGs could open up $12 trillion of market opportunities in four key economic systems. These are food and agriculture, cities, energy and materials, and health and well-being. Collectively, they represent around 60 per cent of the real economy and are critical to delivering the SDGs.

Governments, private sector and civil society participants are all in the midst of developing cohesive SDG strategies, as are institutional investors. Dutch pension fund managers APG and PGGM completed SDG “taxonomies” in 2017, an attempt to bridge the gap between the UN’s targets and tangible investment opportunities. They have begun sharing these and other SDG-related materials with other institutional investors, inspiring CalPERS and others to investigate the SDGs further.

In January, the board of CalPERS directed staff to investigate and report on the feasibility of aligning its portfolio with the SDGs, according to news site Top 1000 Funds. “The Sustainability Development Goals are intended to build prosperity,” CalPERS investment director for sustainability Anne Simpson said in an interview. “As an investor, you could say this is how you build opportunity for us and [how] risk gets addressed. So, that’s really why we’re interested.”

Staff will be asked to present their results in July, alongside presentations from other institutional investors active on the file.

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