Scientifically Assess Impacts Of Sustainable Investments

The practice of selecting and managing financial assets based on their social and environmental performance is undergoing rapid growth and fundamental change. Investors are increasingly pressed by asset owners to prove how one companyu0027s practices are materially more or less sustainable than those of another. Yet, the basic information that companies declare is hardly standardized and is difficult to verify, with unreliable assertions ( 1 ) that are widely criticized as “green washing.” Metrics are mainly restricted to documenting changes to internal business practices but offer limited guidance on whether a companyu0027s actions, products, and services promote human well-being or preserve environmental integrity in the external, real-world domain, fueling reluctance on the part of otherwise enthusiastic investors ( 2 , 3 ). It is here where science can play an important role. Our consortium of an asset owner, an asset manager, and two research universities is designing a next generation of traceable indicators to quantify external context and impact of investments and place these into a decision-making framework useful to investors. Tests of these science-based sustainability metrics are under way on a $2.1 billion portfolio of public equities invested on behalf of a large European pension fund.