S&P Global Study: SDG Aligned Portfolios Outperform
S&P Global’s ESG risk assessment data company Trucost announced today the results of a study indicating outperformance by investment portfolios comprised of companies aligned with the United Nations’ Sustainable Development Goals (SDGs)*. According to the analysis, SDG-aligned portfolios generated superior returns to the S&P 500, and incorporating the Trucost SDG dataset into a portfolio led to a better performance than a non-SDG aligned portfolio.
According to S&P Global Trucost, the analysis found that over the past 6-year period, the S&P 500 SDG portfolio increased by 136.2%, compared to the S&P 500 portfolio generated a 125.8% return, showing a difference of 10.4%. The analysis which conducted historical portfolio performance against the set SDG criteria, while not indicative of future performance, showed a positive correlation. The study also indicated that companies with a higher proportion of their revenues derived from SDG-related products and services tend to outperform companies with lower proportions.
Richard Mattison, CEO of S&P Global Trucost, said:
“We have seen an increased interest in the positive impact that companies have on a society, especially since the start of the pandemic. Trucost SDG Analytics provides information to investors on the alignment of companies to the United Nations’ Sustainable Development Goals. We also analysed the extent to which a company may be exposed to SDG-related risks. Our analysis showed that a portfolio aligned to top tier SDG companies over the past six years achieved a higher return while maintaining the underlying benchmark characteristics.”
The results of the analysis align with recent indications of superior investment performance by sustainable companies. Yesterday, ESG Today reported the results of a study performed by investment manager Fidelity International which found a strong positive correlation between companies’ ESG ratings and their relative market performance in the current year.
*What are the UN Sustainable Development Goals?
The UN SDGs refer to the 17 categories of Sustainable Development Goals adopted by world leaders at the United Nations Sustainable Development Summit in September 2015, with the aim to protect the planet and improve quality of life globally. The UN SDGs set targets to achieve a broad range of aspirational goals, including ending poverty and hunger, improving education, and protecting the environment.
The UN SDGs are divided into 17 categories: No Poverty, Zero Hunger, Good Health and Well-being, Quality Education, Gender Equality, Clean Water and Sanitation, Affordable and Clean Energy, Decent Work and Economic Growth, Industry, Innovation, & Infrastructure, Reduced Inequalities, Sustainable Cities and Communities, Responsible Consumption and Production, Climate Action, Life Below Water, Life on Land, Peace, Justice & Strong Institutions, and Partnerships for the Goals.