ESG

What Investors Ought to Know About SDGs & AI: A Quick Guide

Picture of Antonio Banda Antonio Banda , 6 minute read , August 24 2022

The modern world is in a peculiar place right now. We’ve got the technology and resources to improve our planet, but we often don’t know how to use them despite our best intentions. Or, at the very least, we don’t know where to put our efforts.
Consequently, some investors are looking into Sustainable Development Goals (SDGs). Not only do they want their investments to earn more, but they also want them to do good. If you’re also interested in doing good with your investments, it’s essential to understand the SDGs and their meaning for your portfolio.
In this article, we’ll break down the SDG basics, SDG scores, their relevance to investing, and how SESAMm can help you get and read SDG metrics. But first, a quick review of SDGs.

What SDG means

SDGs, or Sustainable Development Goals, are a set of 17 goals that the United Nations set in 2015, a framework that “provides a shared blueprint for peace and prosperity for people and the planet, now and into the future.” The goals cover issues such as poverty, health, education, gender equality, and environmental sustainability, and they were designed to be universal across countries and continents worldwide. Here are the 17 Sustainable Development Goals:

  1. No poverty
  2. Zero hunger
  3. Good health and well-being
  4. Quality education
  5. Gender equality
  6. Clean water and sanitation
  7. Affordable and clean energy
  8. Decent work and economic growth
  9. Industry, innovation, and infrastructure
  10. Reduced inequalities
  11. Sustainable cities and communities
  12. Responsible consumption and production
  13. Climate action
  14. Life below water
  15. Life on land
  16. Peace, justice, and strong institutions
  17. Partnerships for the goals
The UN’s 17 Sustainable Development Goals

The UN’s 17 Sustainable Development Goals. Image courtesy of UN.org.

What are SDG scores?

Each Sustainable Development Goal has specific targets or indicators that help measure progress toward achieving those targets over time. SDG scores are numerical values given to each entity (country, company, person, etc.) based on their performance in meeting specific targets or indicators for each particular goal.

SDG vs. ESG: What’s the difference?

SDG and environmental, social, and governance (ESG) ratings are two different ways to measure a similar thing: an entity’s social and environmental responsibility. Both can evaluate a company’s impact on society and the environment, but SDGs focus mainly on behavior while ESG focuses on non-financial metrics that help investors understand how companies manage their ESG risks.

However, a big difference between SDG and ESG is that while SDGs cover the environmental and social portion of ESG ratings, SDGs don’t necessarily cover governance. Likewise, and more importantly, ESG only covers two, maybe three, of the 17 SDGs.

SDGs and ESG also have different purposes. ESG measures companies’ environmental, social, and governance performance risk, while SDGs evaluate any entity’s performance in reaching its goals. Put another way, SDGs represent the goals, while ESG is about the methods and processes.

Learn more:Gain Insights From Financial and ESG Data Using AI: A Comprehensive Guide.

Why are SDGs important to investors?

At the company level, SDGs help align corporate strategy with society’s needs. Because the UN designed SDGs to be measurable, countries, companies, and people can hold themselves accountable for progress toward achieving them. And because the goals are measurable, we can score a company’s efforts, giving you an indicator to invest responsibly by aligning your portfolios with SDGs.

According to a publication by McKinsey & Company, sustainable investing appears to have a positive effect, if any, on returns. In other words, investors care about SDGs not only because they benefit society, but also because they measurably support better investment decisions. For example, by incorporating SDGs into company assessments, investors can identify well-run businesses that are better positioned to benefit from the positive effects of improved social and economic conditions. SDGs also allow investors to make better-informed decisions within a defined investment time horizon by focusing on a company’s business exposure toward them. Investors can thus better measure and track a company’s opportunity exposure as a result of achieving the SDGs.

How to measure an entity’s SDG score

There are tools available to measure progress toward each goal—and those tools will play an essential role in helping investors decide which entities they want to invest in and which ones they don’t want to support. For example, SESAMm’s platform, TextReveal®, can analyze web data to generate SDG scores for virtually any entity in our data lake.

How SESAMm provides SDG scores

SESAMm provides SDG scores through its platform, TextReveal, a platform that allows investors to gain insights into companies, people, or topics. Specifically, we use AI to track entities’ contributions toward SDGs, including public and private companies.

We track the 17 Sustainable Development Goals and the 169 underlying targets to detect negative news and positive impact, using a similar algorithm we use for ESG alerts and gathering alternative data. Then, we translate the information into multiple languages.

A dashboard view of Toyota Motor Corporation’s SDG scoresThis dashboard view example shows some SDG scores for Toyota Motor Company, including the volume of articles and messages generating them.

In the video, we show Toyota Motor Corporation as an example. When we query the company through our platform, we find a lot of content related to the company, more than two hundred thousand pieces of content over the past two years. As you might notice, Toyota contributes to the goals associated with Innovation and Infrastructure and Reduced Inequalities. Maybe they could do more regarding Sustainable Cities and Communities and other goals, such as climate action, but overall, the company’s online data shows a positive contribution.

A subcategory view showing two of Joe `’s SDG scores

This subcategory view shows Gender Equality and Good Jobs and Economic Growth scores for Joe Biden.

See how SESAMm can help you with your SDG research

SESAMm is the leading provider of natural language processing and machine learning solutions and analytics for investment firms and corporations.

Our AI and NLP platform, TextReveal

  • Analyzes text in billions of web-based articles and messages
  • Generates investment insights, ESG and SDG analysis used in systematic trading, fundamental research, risk management, and sustainability analysis
  • Enables a more quantitative approach to leveraging the value of web data that’s less prone to human bias
  • Addresses a growing need in public and private investment sectors for robust, timely, and granular sentiment and SDG data

For a personal demo, contact us today.