Research shows a "significant" overlap between the United Nations' 17 sustainable development goals and indicators that are material to the long-term financial performance of companies.
BlackRock mapped 980 financially material sustainability indicators, identified by the Sustainability Accounting Standards Board, to the 242 country-level performance indicators that stakeholders use to track progress on each of the sustainable development goals.
The firm found that the match between the two sets of indicators can be as high as 70%, showing that the SDGs can contribute to an assessment of financial materiality when creating investment strategies, the firm said in a report of the research.
BlackRock also found the SDGs are highly material for three sectors: extractives and minerals processing, infrastructure, and food and beverage. The lowest materiality with the goals is in the financials and services sectors.
Putting all mapping together, BlackRock found that four of the 17 SDGs account for more than half of all SASB materiality indicators: clean water and sanitation (SDG 6); affordable and clean energy (SDG 7); decent work and economic growth (SDG 8); and responsible consumption and production (SDG 12). The report said this finding shows that how a company manages its use of water resources, the energy it consumes and its duty of care toward its workforce are all factors that could not only be material to long-term financial performance, but may also advance or detract from the world's progress on achieving the goals.
The report also showed where there are material gaps in company disclosures, finding no available data corresponding to the goal of reducing inequalities (SDG 10) and quality education (SDG 4).
"We believe that the UN SDGs have the potential to deliver value not only through impact investments, but also through wider ESG-focused strategies," Carole Crozat, head of fundamental research at BlackRock's sustainable investing group, said in a news release accompanying the report. "The integration of material ESG risks and externalities in portfolios can provide critical acceleration of the UN SDGs and can open up the opportunity to magnify the overall contribution of private actors, beyond just impact investment strategies."
Ms. Crozat added that companies will increasingly have to improve their transparency on issues relating to the goals as the SDGs grow in prevalence. "Focus will be where the information is linked to financial materiality, and we anticipate regulatory forces will likely introduce some requirements for companies to improve their disclosures and management of their social and environmental impact."
BlackRock had a total of $9.01 trillion in assets under management as of March 31. It managed $351 billion in dedicated sustainable assets.