How to use the UN Sustainable Development Goals in an investment portfolio

The UN Sustainable Development Goals act as a “blueprint to achieve a better and more sustainable future for all”. So, understanding the UN Sustainable Development Goals is important. But how do you put them into practice when it comes to your investment portfolio?

As we have seen throughout our mini-series, it’s not just out and out ethical funds that have links to the goals. You can get exposure to a more sustainable portfolio through a variety of different funds and asset classes. Most importantly, sustainable investing doesn’t mean sacrificing profits and growth.

“Sustainable development is the development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” — Gro Harlem Brundtland, former Prime Minister of Norway

A sustainable portfolio could be suitable for any investor. But it lends itself particularly well to those looking to start investing for their children. If you are investing for their financial future, presumably you want that future to be a positive one for their environment and well-being too.

Sustainability of a Junior ISA

The current annual limit for investing in a Junior ISA is £9,000. And anyone can contribute an annual lump sum; regular monthly savings; or ad hoc payments into them on behalf of the child. The long timeframe of most Junior ISA’s lends towards an equity heavy portfolio that does long term good, leaving the planet an even better place for your children. Many funds position their sustainable and ESG products in relation to these goals. However, a sustainable portfolio can also focus on a particular outcome like the shift to renewable energy or a carbon-neutral future or more broadly support your values, such as gender equality.

For those concerned with climate change

At FundCalibre we have over a dozen different responsible funds that look to target different areas of the climate emergency we face today. For example, the Artemis Positive Future fund looks for companies making a material positive impact on the world through either environmental or social improvements.

The Ninety One Global Environment fund is a global equities fund that includes emerging markets, but which has a unique approach of only investing in companies that are contributing to the decarbonisation of the world economy.

Another example is BMO Responsible Global Equity which approaches the topic on two fronts: to avoid unsustainable business practices; but also to invest in companies where there are problems to be resolved. There are also restrictions on environmental impact with particular consideration to the Arctic and ecologically-sensitive operations.

For the activist investor

Gender equality is an area where active engagement with companies can push for better. EdenTree, whose CEO and co-manager of the EdenTree Responsible & Sustainable UK Equity fund is Sue Round, has had gender diversity at the heart of its engagement strategy for some time.

The Responsible Investment team at BMO GAM is one of the largest in the industry. The BMO Global Smaller Companies trust is active in company engagement and individual investments are aligned with the UN Sustainable Development Goals when relevant.

FSSA as a company believes that “sustainability is not just a label, but a set of values by which we operate”. Its approach places an emphasis on stewardship and the belief that quality managers and good governance should ensure that environmental and social concerns are rightfully addressed.

For those looking to ‘build back better’

As societies grow, so does the need for new and better infrastructure. Sustainable infrastructure is an excellent opportunity for investors. Financing projects that meet the needs of growing populations and urbanisation takes capital. The First Sentier Global Listed Infrastructure, M&G Global Listed Infrastructure and VT Gravis UK Infrastructure Income fund all have a degree of sustainable projects in their portfolio.

Infrastructure is key for sustainable cities and communities and includes constructing and retrofitting energy efficient buildings, to designing and building safe and resilient public transport facilities, services and centres of innovation.

As David Harrison, manager of Rathbone Greenbank Global Sustainability fund explained to me, “Up to 40% of global emissions come from buildings and infrastructure around the world. This is a huge area for improvement when it comes to emissions and both the medium and long-term opportunities are significant.”