For Investment Professionals only

At scale, innovative solutions that improve efficiency have the potential to cut global carbon emissions by millions of tons each year.

Targeting measurable impact By investing in listed equities to deliver a positive impact, alongside the pursuit of financial returns, we can invest in compa- nies that offer solutions to the world’s most pressing challenges. To identify impactful stocks, fund managers may look to gauge the extent to which compa- nies explicitly aim to address societal and environmental issues. Their impact must be intentional, not accidental.

Impact investors can look to gauge the positive impact that a company delivers against the SDGs. In the case of those providing environmental solutions, these could be: – Goal 6 – ensuring the availability and sustainable management of water and sanitation for all – Goal 7 – ensuring access to affordable, reliable, sustainable and modern energy for all – Goal 9 – building resilient infrastruc- ture, promoting inclusive and sustainable industrialisation and fostering innovation

– Goal 11 – making cities and human set- tlements inclusive, safe, resilient and sustainable. We can map a company’s activities to a primary SDG and quantify its contribu- tion towards achieving it. There also are likely to be secondary SDGs that a company delivers impact against, perhaps as a corollary of its principal activity. By establishing key performance indica- tors that are pertinent to that company delivering an impact against that SDG – for instance, carbon emissions or water saved by using its products – we can assess whether we are making a positive contribution through our investment.

Investing in long-term solutions While there remains a clear gulf between words and deeds, a growing number of companies recognise that they have a role to play in helping deliver progress against global sustainability challenges. In a 2019 study by consultants PwC⁶, nearly three-quarters (72%) of the 1,141 companies analysed publicly mentioned the SDGs in their reporting. However, only 25% did so in sections that discussed business strategy. Ever fewer, just 14%, stated specific tar- gets relating to the SDGs. Nonetheless,

1) UN Sustainable Development Goals, The Sustainable Development Agenda. 2) UN, “The Sustainable Development Goals Report 2020”. 3) World Health Organisation (WHO), Air pollution. 4) UN, “Water quality and sanitation – Media brief”. 5) UN News, “Unsafe water kills more people than war, Ban says on World Day”. 6) PwC, “Creating a strategy for a better world.”

more chief executives are engaging with the Global Goals. As more companies wake up to the urgency of making real- world progress, and their responsibility to act

– individually and collectively –

towards the 2030 targets, companies that can enable that change stand to deliver an enormous positive impact. We believe they also stand to be very successful com- mercially in the coming years. Conceivably, there are multi-billion-dollar opportunities for innovative companies that can successfully deliver viable prod- ucts and services that help solve some of the world’s most pressing environmental challenges. Where active investors can successfully identify these companies, they can there- fore not only target a demonstrably posi- tive impact for the planet and its people, but

sustainable long-term their underlying investors. returns for

For Investment Professionals only. This article reflects M&G’s present opinions reflecting current market conditions. They are subject to change without notice and involve a number of assumptions which may not prove valid. Past performance is not a guide to future performance. The distribution of this article does not constitute an offer or solicita- tion. It has been written for informational and educational purposes only and should not be considered as investment advice or as a recommendation of any security, strategy or investment product. Reference in this document to individual companies is included solely for the purpose of illustration and should not be construed as a recommendation to buy or sell the same. Information given in this document has been obtained from, or based upon, sources believed by us to be reliable and accurate although M&G does not ac- cept liability for the accuracy of the contents. The services and products provided by M&G Investment Management Limited are available only to investors who come within the category of the Professional Client as defined in the Financial Conduct Authority’s Handbook. Issued by M&G Investment Management Limited (unless stated otherwise), regis- tered in England and Wales under number 936683 with its registered office at 10 Fenchurch Avenue, London EC3M 5AG. M&G Investment Management Limited is authorised and regulated by the Financial Conduct Authority.

Issue 102 | April 2021 | portfolio institutional | 37

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