1. Home
  2. Thought Leadership
  3. Exploring the relationship…

Exploring the relationship between modern portfolio theory and SDG investing - BNP Paribas Asset Management

At first glance, investing to achieve outcomes aligned with the Sustainable Development Goals may appear inconsistent with an optimised portfolio outcome under the modern portfolio theory.

Posted on May 18, 2021

Only members with restricted access (ie. academics, asset owners, government and regulatory, independent advisers/trustees and sponsoring employers) can view this article. Please login or join to view.

...
... However, tailwinds or risks associated with SDG-oriented investments may not be appropriately priced in traditional risk-return assessments. This suggests that assessing the SDG profile of investees - which can serve as a proxy for their externalities - is an important supplement to modern portfolio theory-driven analytical approaches and could contribute to portfolio resilience or improved risk-adjusted returns.

Recently, an increasing number of corporations have announced how they plan to integrate the UN SDGs into their business and operations. The 17 SDGs, further delineated in 169 targets and 232 indicators, outline a universal roadmap to a sustainable world 'free of poverty, hunger, disease and want, where all life can thrive' by 2030. Some have dubbed this as 'the closest thing the earth has to a strategy.'

Learn more here