The study found that 13 out of the 17 UN SDGs are significantly underrepresented in funds available to retail investors.
New research conducted by Oxford Risk, a behavioural finance firm, and ESG data provider Impact Cubed, has found that 13 out of the 17 UN SDGs are significantly underrepresented in the investment marketplace, highlighting a misalignment between providers and retail investors.
The collaborative analysis found a disparity between several SDGs which are highly valued by retail investors and their presence within investment funds.
Most notably, SDG 6: Clean Water and Sanitation, and SDG 13: Climate Action, are among the top-ranked SDGs with a substantial gap between investor interest and fund availability.
Speaking to Impact Investor, Chris Lee, head of marketing at Impact Cubed, explained that one of the reasons behind these gaps can be due to the perception of how well a company is performing economically.
“If your company is successful and growing, then you’re more likely to be included in people’s funds just by the nature of being a successful business, such as the Magnificent Seven companies in the S&P 500 for example.”
Another example of misalignment can be seen in the how people invest in water companies, Lee added.
“People will often just invest in water companies without really having a view on whether those companies actually operate sustainably, or contribute to any SDGs.”
He said the partnership with Oxford Risk bridges the gap between what investors want and the availability of suitable funds. “This initiative empowers investors to make decisions that are financially sound and aligned with the global sustainability agenda,” he said.
Impact Cubed said it can design investment strategies that align with specific SDGs, based on the gaps in the market discovered through the two firm’s research.
SDG opportunities
Impact investing has seen strong growth in recent years, with the current market estimated to be worth €1trn, according to the Global Impact Investing 2022 market sizing report. As reported by Impact Investor, there is significant appetite from retail investors, but a lack of opportunities and product availability.
Impact Cubed said the collaboration seeks to help wealth managers and financial advisers to align investor portfolios with personal values and sustainability goals.
The research integrated investor SDG importance scores from Oxford Risk’s research with Impact Cubed’s analysis of the number of funds having more than 20% revenue alignment to each specific SDG.
The analysis found that SDG 3: Good Health and Wellbeing has strong market coverage. However, other SDGs which are popular among investors, yet underrepresented in fund availability included SDG 7: Affordable and Clean Energy, SDG 4: Quality Education, SDG 12: Responsible Consumption and Production as well as SDG 14: Life Below Water.
