References to the United Nations’ sustainable development goals in corporate reports may be used to deceive the general public and would-be impact investors, according a scholarly review published in Nature.
“This impact [of the SDGs] has been largely discursive, affecting the way actors understand and communicate about sustainable development,” wrote the authors, a group of 17 scholars from universities in Africa, Australia, Europe, North America and South America.
The conclusions were drawn from an analysis of 3,000 pieces of scientific literature related to the SDGs. Published in 2015, the SDGs are meant to drive progress in 17 different areas of sustainability if they’re reached by 2030.
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Some controversy surrounds the use of SDGs in corporate reports. Critics of this practice, referred to as SDG washing, say businesses use the goals to highlight positive contributions without referencing the areas where they’re making a negative impact. The authors cited a study that found SDGs were being used in corporate communications to highlight positive sustainability-related achievements and camouflage unsustainable practices.
Another example cited by many critics can be found on the British Petroleum Co.’s website. According to the statement, the petrol producer is driving progress in 16 of the 17 SDGs, including ones related to supporting ocean biodiversity and affordable clean energy. In the article, the authors’ concluded that, while many banks, corporations and institutional investors are increasing engagement in sustainability practices, the majority of those referencing the SDGs do so to cultivate public approval.
According to Martin Belanger, director of investments at Western University, pension plan sponsors may not have an easy way to identify the sincerity of environmental, social and governance-related claims made in corporate reports.
In an emailed statement to the Canadian Investment Review, he said current ESG data is flawed, making it essential to not take claims at face value. “It’s important to understand the ESG field is evolving and that the data available at the moment isn’t perfect. It’s also essential to dig deeper into the portfolio and not take manager statements at face value.
Read: Most alternative investors see UN sustainable development goals as useful investment tool
“I don’t think there’s an easy way to distinguish between valid and insincere ESG or SDG claims. You just have to roll up your sleeves and assess the portfolio. You need to make sure the impact that is being promoted is measurable and request relevant metrics. You should inquire about the ESG integration process and specifically the process to weight ESG factors versus traditional financial indicators. You should also request examples where an ESG issue led to a stock being excluded from a portfolio or have its weight reduced. Finally, you should ask for engagement records.”