Best and worst funds for SDG progress

Oil and gas industry top negative contributor to 10 of the global goals

A review of 6,000 US-domiciled funds has listed those most useful ones for driving progress on each UN Sustainable Development Goal (SDG), as well as the funds doing most to undercut them.

In its report, Impact Investment Leaders and Laggards, British fintech Util found for SDG 1 – “End poverty in all its forms everywhere” – the highest positive contributors in terms of funds tended to have a moderate exposure to banking and insurance. Global X MSCI Nigeria ETF topped the list with 33% of its holding revenue offering positive impact.

Explaining the link between poverty eradication and the exposure of the funds, the report stated: “Access to credit and investment reduces income inequality and fast tracks economic growth in developing markets, while mitigating fiscal stress on households and businesses.

“Insurance increases community and household resilience to and protection from disaster risk, which is increasingly crucial due to climate change.”

Meanwhile, leading the laggards on SDG 1 was Invesco Dynamic Energy Exploration & Production ETF with 21% of holding revenue linked to negative impact.

“Negative contributors share a moderate exposure to upstream oil and gas and metals and mining.

“Extractive industries contribute to poverty, inequality, conflict and corruption in the regions in which they operate. They also reduce agricultural productivity and access to water.

“Fossil fuel consumption is, moreover, the primary cause of climate change, the cost of which hits developing countries hardest,” the report stated.

Undercutting climate

The same fund groups also came top of the leaders and laggards for SDG 13 – “Regulate emissions and promote developments in renewable energy”.

Invesco S&P 500 Equal Weight Utilities ETF has an 81% negative impact as a proportion of holding revenue, while the Global X Hydrogen ETF provides 50% positive impact.

In this instance the positive impact for the goal came from high exposure to renewables and moderate exposure to insurance – the latter industry featuring thanks to its role in climate adaptation.

Exposure to oil and gas once again featured as the main reason funds were classed as the highest negative contributors.

Both oil and gas exposure and minerals and mining exposure are each cited as causes of negative impact for 10 of the goals.

Gender equality

For SDG 5 – “Achieve gender equality and empower all women and girls” – however, the research found moderate exposure to tobacco and alcohol were shared by all the biggest negative contributor funds. USA Mutuals Vice Fund topped the list for undercutting this goal.

Positive contributors to SDG 5 were found to have moderate exposure to healthcare and telecommunications with JNL/Mellon Communication Services Sector Fund driving the goal most.

Managing tradeoffs

The report emphasizes the complexity of looking for positive impact. “There’s no such thing as a ‘sustainable investment.’ Almost every company, industry and fund impacts some goals positively, others negatively,” the report authors stated.

Util CEO Patrick Wood Uribe commented that comprehensive fund data was essential to understanding and managing the tradeoffs that exist in every value chain. In that way, he said, positive impact can be optimized.

The report also points to a recent study that found ESG investing diverts capital flows from countries most in need of them.

“In effect a risk-mitigation tool, ESG is biased towards large companies with reporting resource and against those in developing markets, due to perceived social and governance flaws and straightforward data gaps,” the Util paper stated.  

It goes on to comment that international prosperity is required to achieve every SDG: “Investors and governments need better data coverage to activate flows towards, and spur economic growth within, countries that need it most.”

Funds with highest positive and highest negative contribution to the UN SDGs

GoalHighest positiveHighest negative
SDG 1 – No povertyGlobal X MSCI Nigeria ETFInvesco Dynamic Energy Exploration & Production ETF
SDG 2 – Zero hungerFidelity Agricultural Productivity FundFirst Trust Natural Gas ETF
SDG 3 – Good health and well-beingGlobal X MSCI China Health Care ETFiShares MSCI Global Gold Miners ETF
SDG 4 – Quality educationiShares MSCI Indonesia ETFKraneShares CICC China Consumer Leaders Index ETF
SDG 5 – Gender EqualityJNL/Mellon Communication Services Sector FundUSA Mutuals Vice Fund
SDG 6  -Clean water and sanitationGlobal X Wind Energy ETFFirst Trust Natural Gas ETF
SDG 7 – Affordable and clean energyGlobal X Wind Energy ETFN/A
SDG 8 – Decent work and economic growthGlobal X MSCI Pakistan ETFKraneShares CICC China Consumer Leaders Index ETF
SDG 9 – Industry innovation and infrastructureGlobal X MSCI Nigeria ETFiShares MSCI Global Gold Miners ETF
SDG 10 – Reduced inequalitiesiShares MSCI Indonesia ETFU.S. Global GO GOLD and Precious Metal Miners ETF
SDG 11 – Sustainable cities and communitiesNifty India Financials ETFiShares MSCI Global Gold Miners ETF
SDG 12 – Responsible consumptionFidelity Clean Energy ETFMidas Fund
SDG 13 – Climate actionGlobal X Hydrogen ETFInvesco S&P 500 Equal Weight Utilities ETF
SDG 14 – Life below waterGlobal X Wind Energy ETFAlerian MLP ETF
SDG 15 – Life on landGlobal X Solar ETFU.S. Global GO GOLD and Precious Metal Miners ETF
SDG 16 – Peace justice and strong institutionsFidelity Select Telecommunications PortfolioInvesco Dynamic Energy Exploration & Production ETF
SDG 17 – Partnership for the goalsSPDR(R) S&P Regional Banking(SM) ETFN/A
Source: Util