A science-based heuristic to guide sector-level SDG investment strategy

Figures & data

Figure 1. Summary of sectoral impacts on the 16 SDGs. All positive (green), negative (red), and ambiguous (yellow) impacts are aggregated per subsector, and the x-axis represents 100% of impacts on the 16 SDGs. As an example, ‘Tobacco Production’ has overarchingly negative impacts on 12 SDGs, positive impacts on 0 SDGs, and ambiguous impact on 1 SDG, according to reviewed literature. No documented impacts (grey) by tobacco production were found for 3 SDGs.

Figure 2. Aggregated impact of 81 economic sectors on each SDG. All positive (green), negative (red), and ambiguous (yellow) impacts are aggregated per SGD, and the x-axis represents 100% of the 81 economic sectors. As an example, according to the assessed literature, SDG 13 is impacted negatively by 73% sectors, positively by 7% sectors, and ambiguously by 9%. For 11% of sectors, there is no evidence to assess how they impact SDG 13.

Figure 3. Impact of all assessed economic sectors on the three sustainable development pillars. Panel A: Each box represents an assessed SDG-RBICS code combination (1296 in total) and is coloured according to the assessed aggregate impact of the sector on the SDG (see Figure 1). SDGs are clustered to correspond to the three pillars of sustainability (environment, social and economic). Clusters refer to the environmental SDGs (6, 13–15, bottom layer); the social SDGs (1–5, 7, 11, 16, middle layer); the economic SDGs (8–10, 12, top layer). Panel B: The data from Panel A represented as the ‘wedding cake’ to visualize the pattern of economic sector impacts across the nested sustainability pillars. Panel C: Representation of primary, secondary, and tertiary sectors separately. Primary sector refers to natural resource extraction sectors (e.g. forestry) and includes 10 economic activities (which cover 13% of the entire FactSet L6), Secondary sector refers to sectors that process natural resources (e.g. manufacturing) (33 sectors, 37% coverage of FactSet L6), Tertiary sector refers to all sectors that are neither primary nor secondary (e.g. service sectors) (38 sectors, 44% coverage of FactSet L6).

Figure 4. A generic Causal Loop Diagram on conventional crop production, illustrating direct impacts from crop production to the SDGs and indirect impacts resulting from SDG interconnections. SDGs are coloured according to which sustainable development pillar they contribute to. ‘+’ indicates a positive relationship between two variables (an increase in one, increases or enables another), and a ‘-’ indicates a negative relationship between two variables (a decrease in one, decreases or constraints another). Solid lines represent impact that emanates from crop production activities, dashed lines indicate second-order effects between SDGs or effects from crop production. The red- and blue-coloured arrows indicate two causal pathways elaborated on in the main text. For supporting evidence of each interaction and additional details, see Supplemental Material Table S5.

Figure 5. The hierarchical nature of SDGs necessitate a systemic conceptualization of supply chain impacts. Panel A: Impact shadow cast by a generic supply chain, where primary industries often incur a significant portion of the environmental impacts for production of raw materials used by downstream segments; Panel B: Spillovers resulting from SDG interactions illustrated in a hierarchical SDG format. Figure 5B is modified from Folke et al. 2016 (CC BY-NC 4.0) by inserting the arrow and '-' symbol and by reducing the figure's opacity. The original version of this figure was first presented by Rockström and Sukhdev 2016.

Table 1. Sustainable investing challenges: examples from investment practice.

A. Biosphere dependence

B. Trade-offs

In a recent publication, sustainable asset management firm Robeco (2022) presented the impact of a EUR 100 million investment over one year (2020-21). The information presented exhibits the limited positive impact concerning the environmental SDGs, even in SDG-aligned portfolios. First, two (SDG 14 and SDG 15) of the four environmental SDGs are not featured, meaning that the investment did not have positive impacts on these SDGs. Second, the other two environmental SDGs (SDG 13 and SDG 6) were impacted, but by inadequately addressing the actual pressures on the biosphere. More precisely, the positive impact on SDG 13 was depicted as ‘Providing 10 clients with natural catastrophe insurance (13.1)’. Natural catastrophe insurance mainly supports adaptation and does not aid mitigation efforts by reducing carbon. Third, SDG 6 is mentioned, but the investment resulted in improving water access and treating wastewater, not actively restoring freshwater ecosystems. This example demonstrates the enormous challenge of aligning with, and progressing on, the environmental SDGs when investors manage SDG-focused portfolios.

An example that illustrates trade-offs between SDGs due to investments is the analysis of biodiversity impacts of the largest European listed companies assessed by the Groupe Caisse des Dépôts’ Asset Management Division. In a webinar in 2021, their analysis showed that a low-carbon portfolio had a biodiversity footprint over 25% larger than the benchmark portfolio (CDC, Biodiversité 2021). This shows inherent trade-offs between environmental sustainability objectives, such as climate and biodiversity (as reflected in SDG 13 and 15 and illustrated in Figure 5(B)).

Folke, C., R. Biggs, A.V. Norström, B. Reyers, and J. Rockström. 2016. Social-ecological resilience and biosphere-based sustainability science. Ecology and Society 21, no. 3: 41. doi:10.5751/ES-08748-210341.

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Rockström, J., and P. Sukhdev. 2016. How food connects all the SDGs. Keynote Speech. Stockholm: EAT Stockholm Food Forum, 13 June. https://www.stockholmresilience.org/research/research-news/2016-06-14-how-food-connects-all-the-sdgs.html.

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Robeco. 2022. Robeco's SDG framework - how we assess company contributions to the SDGs for integration into investment portfolios. https://www.robeco.com/files/docm/docu-robeco-explanation-sdg-framework.pdf.

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CDC Biodiversité. 2021. GBS. Presentation of the global biodiversity score GBS for financial institutions (GBSFI). February. https://www.youtube.com/watch?v = P9uUqdwLq4M&t = 4s.

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Data availability statement

The data that support the findings of this study is available in Figshare repository at https://doi.org/10.17045/sthlmuni.19959773.v1. The dataset is shared under the Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0) license.