Pensions For Purpose report reveals 'wide variations' in SDG mapping market

A report by Pensions for Purpose has revealed “wide variations” in the methodologies used by providers to map portfolios to sustainable development goals (SDGs).

It found that whilst some focused purely on revenue-mapping, others also considered the governance and operations of the underlying companies.

Furthermore, just two-thirds of the firms said they mapped to all goals, with the remainder excluding goals that were harder to map to, such as SDG 16: peace, justice and strong institutions, or SDG 17: partnerships for the goals.

The 17 SDGs sit at the heart of the UNs 2030 Agenda for Sustainable Development, and are considered “an urgent call for action by all countries … in a global partnership”.

The report revealed however, that “tenure of experience” in SDG mapping remained limited, with a “wide range” of sample pricing quotes for a £500m pension fund portfolio.

Pensions For Purpose has predicted that pricing could become more competitive as experience grows and more firms begin to offer this service.

Current challenges limiting the market include the quality of data, mapping financial data to all SDGs, as well as taking negative contributions into account and issues around private markets.

Indeed, whilst all providers were able to map listed equities, and a further 75 per cent were able to map fixed-income portfolios, just under half (40 per cent) had the capability in private assets.

The group also emphasised that "not all SDG mapping firms are equal", splitting providers into four groups: fund managers, consultants, specialist analytics firms and framework providers.

It suggested that pension funds consider each different provider, and their respective capabilities, positives and negatives, before embarking upon a search for an SDG mapper.

Specialist analytics firms for instance, whilst highlighted as having excellent reporting capabilities and an independent perspective, were also identified as being "less likely to to work with a pension fund to interpret results and advise on strategy".

Meanwhile, fund managers, whilst often a low-cost solution, may be limited in the breath of coverage if they are limited to their existing investments, or if competitors are unwilling to share holdings data.

The analysis, undertaken by Pensions for Purpose associate, Naureen Khan, was completed following a number of discussions with pension funds, interested to know which firms could map to the SDG.

It includes feedback from 15 firms, however Pensions For Purpose clarified that a further five firms had agreed to meet with the group to discuss their capability, but were unable to meet the report deadline.

The group also noted several enquiries from providers after the deadline, stating that they are “likely to update this research over time” as more providers provide data around their services and capability.

It concluded that mapping SDGs is a "fast-moving area, data-intensive and requiring subjective input along the way", adding that whilst wide variations in approach can make it difficult for pension schemes to assess which firm is right for them, tools, such as this analysis, will be able to help support scheme trustees.

Pensions For Purpose director, Karen Shackleton, added: “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.”

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