NEW YORK, Jan. 28, 2018 - Scientists at The City University of New York (CUNY) and Harvard University, in partnership with UBS Asset Management, have developed a scientific framework to inform investment decisions that make positive contributions to sustainable environmental stewardship and human well-being. Among the beneficiaries are the U.N. Sustainable Development Goals that promote access to clean water, maintaining human health, food security and biodiversity protection.
The research group jointly led by Dr. Charles J. Vörösmarty, founding director of the Environmental Sciences Initiative at the Advanced Science Research Center (ASRC) at the Graduate Center, CUNY and Dr. John D. Spengler, the Akira Yamaguchi Professor of Environmental Health and Human Habitation at the Harvard T.H. Chan School of Public Health, described both the team's overall strategic vision and working framework in a Policy Forum article published in the journal Science on February 2. Environmentally sustainable investments in the United States now total one-fifth of all professionally managed assets in this country with rapid expansion of this asset pool anticipated for many years to come.
"Other frameworks for measuring corporate sustainability focus on how internal corporate production processes at the facility level support environmental integrity or human beneficiaries, but give limited guidance for assessing the longer-term impact of business practices," said Vörösmarty. "Our proposed framework relies on scientifically-based metrics to help investors evaluate how companies' actions, products and services support the environment and human well-being. Indeed, this is a new calculus for sustainable investing."
The research teams from CUNY and Harvard are testing this framework by analyzing the environmental and health benefits of a $2.1 billion portfolio of public equities managed by UBS Asset Management on behalf of PGGM, the Dutch pension fund. Four challenge areas are being considered: water, climate change mitigation, human health and food security.
The team leveraged recent advances in several scientific disciplines, including earth observation and modeling, epidemiology, and public health, and linked these data to corporate operational and financial data to show how products and services can contribute to more sustainable environmental and human systems. The research suggests a new way to assess the sustainability of corporations for investors, who are increasingly interested in this investment approach. A key is to provide systematic, transparent, and verifiable metrics of success based on well-accepted scientific approaches, in contrast to the self-disclosure of beneficial actions that are claimed typically by companies themselves.
"We need to reframe sustainable development in terms of building our collective natural, human and social capital," Spengler said. "In order to do this our financial institutions need clear signals that the goods and services of companies are actually healing natural systems and providing for the wellbeing of society."
The paper lays out practical steps toward achieving this vision of investment in sustainability efforts outlined by the UN Sustainable Development Goals by proposing a formal dialogue space for information-sharing and best practices, that brings together the financial sector with auditors, corporate and nonprofit executives, and scientists.
"Institutional investors are facing growing pressure to invest sustainably, and to measure the positive environmental and social impacts of their portfolio. Developing the right approach to the UN Sustainable Development goals requires expertise beyond fundamental investing, including scientific research, data collection and management," said Dr. Dinah A. Koehler, executive director and head of research on the Sustainable Investor's team at UBS Asset Management. "The ground-breaking impact measurement framework, developed in partnership with two premier academic institutions, provides investors with transparency into the impact of their portfolios on targeted environmental and social challenges."
For investors, this work provides an invaluable system to evaluate corporate practices, the impacts of which vary within the context of business operations in different regions and business sectors. Doing so allows for direct comparisons between companies -- an important consideration when identifying how to make investments that have beneficial environmental and social impacts.
"The metrics we have been developing are designed to shape investment decisions and to transform the way companies are identified and chosen by asset managers--not just based on their profitability but also as bona fide contributors to sustainability," Vörösmarty said. "The global effect of this transformation would likely be valued at trillions of dollars in terms of its impact in helping to limit climate change, reduce water pollution and supply stresses, foster human health and counter the widespread loss of ecosystem services."
Collaborating with a global investment manager such as UBS Asset Management provided the researchers access to a portfolio with which they could analyze the performance of their proposed framework, giving real-world data rather than hypothetical modeling.
"As an investor, one of our most important goals is to measure the tangible effects of our investments against the Sustainable Development Goals we selected," said Piet Klop, senior adviser of responsible investment at PGGM. "The approach that CUNY and Harvard have pioneered is of great interest to us due to its focus on product impacts and a methodology that is scientific and scalable."
Members of the research group who contributed to the sustainability investment paper include co-authors Dr. Dinah A. Koehler, UBS Asset Management, New York and Piet Klop, PGGM, Zeist, Netherlands.
Other researchers include five members of the Environmental Sciences Initiative at the Advanced Science Research Center at the Graduate Center, CUNY -- C.J. Vo?ro?smarty, V. Rodri?guez Osuna, A. D. Cak, Z. D. Tessler, F. Corsi; and P. A. Green -- and three researchers at the Harvard T.H. Chan School of Public Health, Center for Health and the Global Environment -- J. D. Spengler, J. J. Buonocore and R. Sánchez.
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About the Graduate Center, CUNY
The Graduate Center, CUNY, is the focal point for advanced teaching and research at The City University of New York (CUNY), the nation's largest urban public university. With over 35 doctoral and master's programs of the highest caliber, the Graduate Center fosters pioneering research and scholarship in the arts and sciences and prepares students for careers in universities and the private, nonprofit, and government sectors. The Graduate Center's commitment to research and scholarship for the public good is exemplified by its more than 40 centers, institutes, and initiatives, including its Advanced Science Research Center, a 200,000 square-foot facility in upper Manhattan, designed to promote collaboration among scientists in five areas of global research and innovation: nanoscience, photonics, structural biology, neuroscience, and environmental sciences.
The Graduate Center benefits from highly ambitious and diverse students and alumni--who in turn teach hundreds of thousands of undergraduates every year. Through its public programs, the Graduate Center enhances New York City's intellectual and cultural life.
About the Harvard T.H.Chan School of Public Health
Harvard T.H. Chan School of Public Health brings together dedicated experts from many disciplines to educate new generations of global health leaders and produce powerful ideas that improve the lives and health of people everywhere. As a community of leading scientists, educators, and students, we work together to take innovative ideas from the laboratory to people's lives--not only making scientific breakthroughs, but also working to change individual behaviors, public policies, and health care practices. Each year, more than 400 faculty members at Harvard Chan School teach 1,000-plus full-time students from around the world and train thousands more through online and executive education courses. Founded in 1913 as the Harvard-MIT School of Health Officers, the School is recognized as America's oldest professional training program in public health.
UBS provides financial advice and solutions to wealthy, institutional and corporate clients worldwide, as well as private clients in Switzerland. The operational structure of the Group is comprised of our Corporate Center and five business divisions: Wealth Management, Wealth Management Americas, Personal & Corporate Banking, Asset Management and the Investment Bank. UBS's strategy builds on the strengths of all of its businesses and focuses its efforts on areas in which it excels, while seeking to capitalize on the compelling growth prospects in the businesses and regions in which it operates, in order to generate attractive and sustainable returns for its shareholders. All of its businesses are capital-efficient and benefit from a strong competitive position in their targeted markets.