Financial research house Morningstar has introduced a new suite of impact-focused indices targeting companies whose economic activities address the United Nations’ Sustainable Development Goals (SDGs).
Thomas Kuh, Head of ESG Strategy at Morningstar Indexes.
Adopted by UN member countries in September 2015, the SDGs are a set of 17 goals established to guide international cooperation on issues such as water sanitation, poverty, climate change, and gender equality.
The goals, which are further broken down into 169 measurable targets, seek to promote active participation from governments, corporations, and investors.
The indices harness the capabilities of Morningstar Sustainalytics to first exclude companies that do not satisfy stringent ESG metrics and then screen for firms with significant revenue exposure to the targeted UN SDGs.
The suite consists of nine indices at launch. Five of the indices provide global equity exposure while targeting companies aligned with UN SDGs related to climate action, human development, resource security, healthy ecosystems, and basic needs.
The remaining four indices provide diversified exposure across the UN SDGs while focusing on global, global developed, developed Europe, and Transatlantic geographic regions.
Constituents are weighted by float-adjusted market capitalization and then tilted to increase exposure to the companies with the greatest percentage of revenue derived from SDG-aligned activities.
Thomas Kuh, Head of ESG Strategy at Morningstar Indexes, commented: “In speaking with our global clients, we see sustainable investing evolving very quickly, beyond simply measuring ESG risk. Investors are asking for more sophisticated tools to measure the impact that their assets are having on the environment and, more broadly, on society.”
Rob Edwards, Global Head of ESG Product at Morningstar Indexes, added: “We are actively developing our global index capabilities with a focus on impact and climate, working closely with our colleagues at Sustainalytics. Our new Sustainable Activities Involvement Indexes are an important step, and we will be introducing additional tools for investors in the coming months.”