The United Nations' sustainable development goals can help institutional investors to invest in new opportunities and identify future areas of risk in portfolios, said pension fund executives.
Speaking on a panel discussion at the Principles for Responsible Investment annual conference in Berlin on Tuesday, executives outlined the ways they are using the UN's 17 sustainable development goals in their portfolios and why they are important.
Alexandra West, portfolio head, strategy and innovation at the A$40 billion ($32 billion) Cbus, Melbourne, Australia, said there are two reasons why the goals are important. The first is "because they will ensure a sustainable economy and they will drive economic growth," and the second is that they "need us. Without mainstream institutional investment" the goals will not be achieved, she said.
Anne Simpson, investment director of sustainable investments at the $336.2 billion California Public Employees' Retirement System, Sacramento, agreed. "These are not just a moral imperative," but an "economic necessity" given CalPERS' size, which means the fund has "nowhere to hide from the world's problems and the world's risks. However, we are not in a position, even though we are a large fund, to tackle these … without a public policy framework."
The goals also present potential for returns. Ms. Simpson said CalPERS relies on economic growth globally and cannot invest in only one place.
"I think we have our part to do … not out of charity, but mutual interest to ensure those goals are met." Ms. Simpson added that the goals will "underpin our ability to pay pensions" over generations to come.
For the €394 billion ($470.4 billion) Stichting Pensioenfonds ABP, Heerlen, Netherlands, the goals "are a gift from the United Nations to the world," said Josepha Meijer, vice chairwoman and member of the board of trustees at the fund.
Executives at ABP see a number of areas where the goals are relevant: "They provide a widely supportive frame of reference, and also a vision to the world." She said the goals can be used as an "overarching framework" in portfolios. "ABP wants to invest in solutions … that contribute to SDGs … through investments that meet our risk/return requirement, but also (have a) positive impact," said Ms. Meijer.
But not all goals are investible, added Ms. West. Some never will be, and others will require policy changes. She said investors have three levers they can pull: allocate capital, engage and "advocate either for others to join you or for policy changes to make things more investible."