SDG’s vs ESG’s: Which metrics are the better for Asset Managers?
Updated March 12, 2023
Updated March 12, 2023
Asset Managers have a huge responsibility to not only generate strong returns for clients, but also ensure investments are socially responsible and environmentally sustainable.
Metrics are therefore an invaluable tool when assessing a company’s sustainability performance and greenwashing risks.
That's why it's important today more than ever, to consider the difference between ESG and Sustainability (SDG) metrics.
ESG (Environmental, Social, and Governance), describes a set of criteria investors use to evaluate companies based on their environmental impact, social responsibility, and corporate governance practices.
While ESG metrics can be helpful in identifying companies who are reporting positive strides in these areas, they don't always capture the full picture. Also, an average score from hundreds of indicators calculated over a year earlier, reduces its value.
SDG metrics however, take a more holistic approach to evaluating companies and can be done in real time.
Rather than focusing solely on ESG practices and policies, SDG metrics look at the overall impact on the environment and society, taking into account factors like, carbon footprints, products and services, and the impact on local communities.
This can all be done using annual reports and market updates with real, raw data. SDG metrics give you a complete understanding of where and what you’re investing in, allowing you to make more informed decisions.
The really good news is, investing in sustainable and socially responsible companies can result in better long-term returns. These companies are usually well-managed, financially stable, and experience fewer negative events causing share prices to drop.
Volkswagen in 2015, BP in 2010, Vale in 2019, and Facebook in 2018 are all examples of companies with high ESG ratings from data providers, but were unsustainable in their approach to society and the environment.
It’s also no secret companies not taking measures to decrease their environmental impact are facing greater regulatory and reputational risks as the world moves towards sustainability.
By investing in companies already taking proactive steps, Asset Managers can help clients avoid these risks and position themselves for long-term success.
Overall, while ESG metrics can be a helpful tool for evaluating companies, they don't always provide the full picture.
SDG metrics on the other hand, give you a more complete understanding of any given company, enabling you to make informed decisions and achieve your client’s financial goals, all the while promoting a sustainable and socially responsible economy.
Sustainable Platform is the world's leading independent SDG and ESG data provider. Recognised by the UN as a great resource.