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Hypothesis: 

An entity's sum of its dir/indirect impacts across SDGs = entity's total dir/indirect impact towards its one Purpose

An SDG (Sustainable Development Goal) consists of IPs (Impact Parameters)  with weightage in the SDG. For e.g. CO2, Methane or any GHG reductions are IPs for SDG13, measured in absolute metrics like metric tons of CO2, Methane or any GHG. Other such IPs are to be discovered by the world for other SDGs, standardised and adopted by corporates and indirectly by FIs. These other IPs are to be achieved through their multi-stakeholder focus.  For SDG 13, their goals are aligned with science-based targets, and their weightage in the SDG and pathways are standardised by the sector.

Real-economy large corporations

 

Assumptions: 

IPs discovered for each of the SDGs and standardised by sector along with IP's % within each of the SDGs, their goals set, and sectoral pathways defined

For an ideal company, its SDGs' weightage in its one Purpose in other words entity's ideal relative focus across SDGs standardised by sector

Known:

IPs targets declared in alignment with their sectoral pathways

SDG consists of which IPs and their % already defined for the company based on its sector

Ideal weightage of each SDG in its one purpose, in other words - the entity’s ideal relative focus across SDGs defined by the company based on its sector = %SDG ideal

Targeted weightage of each SDG in its one purpose in other words - the entity’s targeted relative focus across SDGs for the period  declared while looking into its ideal and actual (from its previous cycle) relative focus across SDGs, its strategy, plans etc. = %SDG targeted

IP data Actual

 

Calculate at the end of the period (say every year):

%IP achievement = (IP data Actual / IP target declared) *100. (max 100%)

For %SDG achievement

 

say SDG1 consists of IP1 & IP2 and =  % a of IP1 + %b of IP2

Then, %SDG1 achievement =  %a * %IP1 achievement + %b * %IP2 achievement

say SDG2 consists of IP3 & IP4 and =  % c of IP3 + %d of IP4

Then, %SDG2 achievement =  %c * %IP3 achievement + %d * %IP4 achievement
….

Then,
weighted %SDG1 achievement = %SDG1 targeted * %SDG1 achievement

weighted %SDG2 achievement = %SDG2 targeted * %SDG2 achievement

….

 

Sum of weighted %SDGs achievements -> denotes %of total impact towards one purpose achieved and is universal and comparable across sectors.

The actual relative focus across SDGs for the entity will be arrived at by calculating its weightage from the sum of all weighted %SDG achievements. -> this information will be useful for planning in the next cycle

 

Leading Financial Institutions (FIs)

 

Assumptions: 

FIs standardised by Categories

FI's IP value is derived from its underlying companies' or its assets' IP's (which ultimately needs to be arrived at from some real economy companies' IP data in proportion to investments) in proportion to investments made into or planned for and its own IP data. 

FI’s SDGs consist of which IPs and IP's %contribution in the SDG already standardised by FI's Category.

For a FI, its SDGs' weightage in its one Purpose; in other words, FI's ideal relative focus across SDGs standardised by FI Categories

SDG's IP's Ideal value per unit of actual or targeted turnover is standardised by the category of FI for the reporting cycle

Known:

FI’s targeted relative focus across SDGs arrived at from underlying companies' and assets' proportionate IPs targeted and ideal IP value (from SDG's IP's ideal value per unit of investment and investments planned for) 

FI’s targets for its own IPs

FI’s own IP data

wrt underlying company's (directly or as an underlying company for the asset when assets are from real economy companies)

IP target Comp (it is the proportionate value of the IP target Comp overall) 

IP data Actual Comp (it is the proportionate value of the IP data Actual Comp overall) 

proportionate value of IP Comp is calculated from considering % Comp's Funds invested in by FI

 

Calculate at the end of the period (say every year):

 

IP for FI ( for the FI in consideration or its assets when they are from the real economy companies directly, but if not, they need to be calculated for the underlying FI first and then added here just like the IP data Actual Comp or IP target Comp)

 

IP data Actual FI = sum of ( IP data Actual Comp ) + FI’s  own IP data

IP target FI = sum of ( IP target Comp ) + FI’s target for its own IP +additional tightness in targets may include considerations from FI's other plans 
% IP achievement for FI wrt targets = IP data Actual FI / IP target FI  * 100  (max 100%)

SDG's IP's Ideal value = SDG's IP's Ideal value per unit of turnover * FI's turnover for the reporting period

 

%SDG1 achievement FI

 

% IP1 achievement for FI wrt targets* (IP1 target FI /SDG1's IP1's Ideal value) * IP1's % contribution in SDG1 +

% IP2 achievement for FI wrt targets* (IP2 target FI /SDG1's IP2's Ideal value) * IP2's % contribution in SDG1 +

......

(here, the idea is to prevent portfolio greening and encourage NZ transition of underlying companies and assets, note the max value of IP target FI / SDG IP's ideal value will be 1 )

weighted %SDG1 achievement FI = %SDG1 achievement FI * SDG1's targeted weightage in one Purpose

Likewise calculate for SDG2, SDG3, ....


Sum of weighted %SDGs achievements FI - > denotes % total impact towards its one purpose achieved, and it is universal and comparable across FIs

The actual relative focus across SDGs for the FI will be arrived at by calculating its weightage from the sum of all weighted %SDG achievements FI -> this information will be useful for the planning for next cycle

Note: For real economy companies, IPs for each of the SDGs need to be standardised by sector, and their % within the SDGs need to be standardised by sector, too. their goals are set in alignment with science based targets. and their pathways standardised by sector. Then at a set period, say every year, entities measure their current state, baseline them and set their targets in alignment with their sectoral pathways directly or as financed. For the FIs, they need to be classified into standardised categories; with their ideal relative focus across SDGs standardised; their IPs for each of the SDGs and their % within each of the SDGs standardised, and for each SDG's IPs' ideal value per unit of FI's turnover also standardised for each reporting period say annually. Then likewise, at a set period, say every year, FI measures the current state of their IPs (derived from their underlying companies and assets IP in proportion to investments made into+FI's own IP data ), baseline them and set their targets ( sum of IP target from underlying companies and assets in proportion to investments planned for + FI’s target for its own IP + additional tightness in targets may include considerations from FI's other plans ). Here, FIs have the opportunity to influence the targets set by their underlying companies and those of their assets and thereby adjust their own targets. When a real economy company or FI declares its targeted relative focus across SDGs, it must measure its actual having had discovered (or standardised for FI by category) its ideal, already, to enable their suitability. The entire IP and SDG measurements would be open to external review and audit as per this methodology. Also, in this methodology 16 SDGs are considered, leaving aside the 17th as it is created to support the achievement of the other 16.

If you want to receive an illustration of the universal ESG metrics, write to us at the contact below with your business card. We respond to every email received.

 

Just NZ Transition, Universal ESG Metrics, regTech, Std. NZ Transition Plan
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