The UN's sustainability goals are guiding points for investments

The UN's 17 sustainability goals are the world's joint work plan to eradicate poverty, fight inequality and stop climate change by 2030. Can one invest in listed companies that help move us closer to such a world?

We at DNB Asset Management believe so. In some of our equity funds, we work with the UN's sustainability goals as a framework when we hand-pick shares. Out of the UN's 17 sustainability goals, we consider 11 of them to be directly investable.

Can one invest in "zero hunger"?

The first goal we have identified as investable is the UN's sustainability goal number 2: "End hunger, achieve food security and improved nutrition and promote sustainable agriculture"

The UN has estimated that approximately 1.5 billion people are affected by hunger and chronic malnutrition. The positive side to it is that the world contains more than enough food for everyone to eat enough to be full. The statistics indicate that approximately 1/3 of all food produced is wasted. The solutions on the topic are complex, but contain concepts such as distribution and refinement of resources. It is a important to answer questions about what, how, why and where when it comes to food production and ensuring sustainable use and distribution of food.

The problem we now face is about how to work towards the goal of "zero hunger" by choosing the right stocks. How are we thinking? We at DNB ESG LAB define a set of principles, rules and variables within the sustainability goals, which will guide the choices of shares. We call them sustainable investment strategies which consists of three phases.

A. Definition of the Investment Area

We start by defining important words, concepts and contexts. A key investment area for our work with goal number 2 is "agriculture". This is where large parts of the food we consume is grown and produced. The industrialization of agriculture over the last 150 years has led to an enormous increase in efficiency in the form of increased yields and a reduction in manual labor. Machinery, fertilizers, chemical pest control, genetic development, medication, irrigation, economies of scale, storage technology and fast transport of the food produced to consumers are all elements of industrial agriculture. Such efficient and scaled food production contributes to us being able to get closer to sustainability goal no. 2; "zero hunger"

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C. Relevant investment categories for "hunger"

So let us return to our analysis of "zero hunger". Our analysis of companies operating with the sustainability goal of eliminating hunger must take into account more than just food production which is efficient but only temporary. Perhaps even more important over time is what is produced (No. 3 good health, No. 13 climate action), how it is produced (No. 6 clean water, No. 14 life below water, No. 15 life on land), where the food is produced (No. 11 sustainable cities and communities) and why it is produced (No. 12 responsible consumption and production).

In a dynamic world under constant change, there are a number of companies that are embracing the transition from industrial to sustainable agriculture, from high- to low-emission agriculture, from animal- to plant-based food and from broad-based processing to precision agriculture.

We at DNB ESG LAB call this «Agriculture 2.0 and Future Food». And it is precisely here that we, together with other communities, work to find different companies to invest in with the UN's sustainability goals as a framework. In ESG Lab, we work with collecting existing data and in addition to defining our own data on companies' sustainability activities and investments (so-called KPIs) in a database that we call the DNB Integrated Sustainable Development Goal Tool (ISDGT). This means that we can get an overall assessment of each company's contribution to and compliance with the sustainability goals.

If we put sustainability goal number 2 at the forefront, the focus is mainly on three areas; agriculture, animal health and equipment.

1. Agriculture - Listed companies that produce and sell food for consumption

There are a number of large listed companies that produce food within what we have described as industrial agriculture. But the vegetation of alternatives is growing rapidly. Plant-based foods take market share from meat due to several things such as taste, nutrition and less climate emissions. Beyond Meat (USA) is a good example of this. They produce «vegetarian burgers and sausages». Other examples are Oatly (USA), which makes "milk" based on vegan ingredients such as oats or almonds, Whole Earth Brand (USA) which produces natural additives and Vital Farms (USA), which produces organic eggs and butter. We are thus seeing a shift in the way food is produced. The controlled greenhouse's environment is optimized with water, nutrients, energy and space. App Harvest (USA) and Kalera (NO) are two companies that also operate in vertical farming.

2. Animal health - Listed companies that develop and sell medicines and vaccines that prevent or treat disease.

The animal and fish vaccine company Benchmark (ENG), which has a large R&D department for fish in Norway. Several fish farming companies, such as SalMar, have an agreement with this company to ensure the health of the fish. Novartis (Switzerland) is another company within this group where several of the subsidiaries conduct R&D on animal health.

3. Equipment - Listed companies that develop, produce and sell equipment that increase productivity, reduce the use of input factors, reduce transport waste and create efficient distribution solutions.

Within this area we find, among others, the company John Deere (USA) which is the world's largest manufacturer of agricultural machinery. In recent years, the company has developed technology that optimizes the use of input factors down to each individual plant or individual animal, whenever needed. This type of precision agriculture helps to increase the profitability of operations, while at the same time helping to reduce climate emissions.

The UN's sustainability goals are guiding points for investments

Can one invest in "zero hunger"?

A. Definition of the Investment Area

B. Goal Conflicts

C. Relevant investment categories for "hunger"

What are we doing?

UN Sustainability Goals