Summary
Highlights
Sandra Aalio, ATRAM's chief investment officer, introduces the ATRAM Sustainable Development Growth Fund, highlighting it as the first and only SDG fund in the Philippines. This fund aims to combine competitive returns with solutions to societal and environmental issues through SDG-driven investments. Jar, Head of Investment Research, and Kenzie, Sustainability Associate, are the driving forces behind this initiative.
The discussion clarifies that ESG (Environmental, Social, Governance) is often viewed through the lens of risk, assessing companies' risks related to these factors. In contrast, SDG (Sustainable Development Goals) investing, inspired by the United Nations' 17 goals, focuses on identifying opportunities for companies to make a positive impact and contribute to global sustainability agendas. While ESG indicators often align with SDGs, the ATRAM fund specifically targets the impact and growth potential derived from addressing these goals.
The fund uses an 'SG score' framework that incorporates all 17 SDGs, operationalizing them at a firm level through KPIs. They focus on three main aspects: operations, internal policies, and CSR activities, while excluding companies with consistent negative ROE or extensive coal usage. Key SDG areas of focus include clean energy, climate action (reducing emissions and shifting to renewables), and quality education (employee development).
Launched in February 2021, the ATRAM SDG fund was the best-performing fund in 2021 and recovered to become the third-best performing UI equity UITF in 2024. This success validates their investment thesis: companies integrating sustainability, as defined by the SDGs, can generate above-market returns. The fund emphasizes that anchoring operations towards these goals creates value and can yield alpha even in the short term.
The fund evaluates companies by measuring KPIs across operations, policies, and CSR. An example of a high-scoring company is CNPF, for its net-zero plastic goals, and Mandday for using mono-materials to aid recycling. The banking sector has shown significant progress in SDG integration, with BPI recognized for its efforts in sustainable banking and Union Bank for its employee development programs (Union Bank University). ATRAM also applies these standards internally, measuring its own emissions, energy consumption, water usage, and waste generation.
A primary challenge in SDG investing, especially in markets like the Philippines, is the lack of standardized and verifiable data, leading to risks of 'greenwashing.' The fund addresses this by thoroughly checking data, engaging with companies to understand sudden changes, and encouraging them to address all relevant sustainability levers holistically. Profitability is a crucial guardrail; companies must be financially sustainable to be included in the fund. The fund selects about 20 companies out of 100 scored, making it highly selective.
Kenzie, with a background in development studies, finds inspiration in being part of an evolving industry and making a positive impact through sustainable finance. Jar, a 'Gen X' investor, highlights how sustainability adds a new, measurable dimension to traditional profit maximization, considering human and natural capital. The fund aims to empower investors to send a clear message to companies about the importance of integrating sustainability into their operations. They encourage interested listeners to consider the ATRAM SDG fund as an accessible way to align their portfolios with SDG goals.