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No Firm is an Island: using the SDGs to bridge modern portfolio management to the future

No Firm is an Island: using the SDGs to bridge modern portfolio management to the future

18-04-2019 | Article

Companies don’t operate in seclusion; they are part of a larger inter-related system made up of variables that interact in unpredictable ways. These interactions can have serious and far-reaching consequences for not only business and investments but the environment and society. Traditional portfolio construction models do not sufficiently account for these variables resulting in erroneous NPV calculations and over-valued portfolios. Extra-financial variables like ESG data and contribution to SDGs help companies and investment managers implement a systems-thinking approach that considers the impact of decisions on future resources.

Speed Read

  • When viewed in the long-term, many un-sustainable companies are, at present, over-valued and many sustainable companies under-valued.
  • Company performance assessed systematically helps synchronize short-term assets with the long-term liabilities and helps protect portfolio returns.
  • ESG data and the SDG framework help asset managers and investors to organize, prioritize and assess variables that can increase or reduce companies’ future value creation potential.

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