Previously I have written about the importance of the healthcare, resource transformation, food and beverage, consumption, extractives & minerals processing, and the renewables and alternative energy sectors to the 17 Sustainable Development Goals (SDGs). The underlying data for that blog are based on a paper “The Relationship Between Investor Materiality and the Sustainable Development Goals: A Methodological Framework” that I wrote with Professors Gianni Betti and Costanza Consolandi of the University of Siena. A summary of our methodology is provided in my healthcare post. In brief, we mapped the 26 material environmental, social, and governance (ESG) issues (organized in terms of the categories environment, social capital, human capital, business model & innovation, and leadership & governance) in all 77 industries organized into 11 sectors, developed by the Sustainability Accounting Standards Board (SASB), to the 169 targets of the SDGs. Mapping these issues to the SDGs’ targets enabled us to assess how each industry is creating or destroying value for society while focusing on those ESG issues that create value for shareholders. Based on this mapping we created an index that ranges from 0 to 100.
In this post I will analyze the importance of the infrastructure sector. It’s overall score is 21.4—compared to 36.0 for food and beverage, 32.6 for healthcare, 30.4 for extractives & mineral processing, 28.4 for resource transformation, 23.8 for renewables and alternative energy, 20.1 for consumption—putting it the low end of the sectors I have written about so far. There is variation with this sector of eight industries. At the top end is electric utilities and power generators (36.4). In the middle are water utilities and services (26.6), home builders (23.9), and waste management (23.4), and real estate (19.5). At the low end are gas utilities and distributors (9.9), and real estate services (7.1).
This sector has the highest impact on six SDGs, all at about the same level: #6 (Clean Water and Sanitation-28.8 [six of six targets]), #7 (Affordable and Clean Energy-26.6 [three of three]), #11 (Sustainable Cities and Communities-36.9 [six of seven]), #12 (Responsible Consumption and Production-26.2 [four of eight]), #14 (Life Below Water-31.3 [five of seven]), and #15 (Life On Land-28.0 [six of nine]). There is substantial variation in which of SASB’s material ESG issues for each industry are relevant to the various SDGs. Life cycle impacts of products and services in the category of business model and innovation is material to all eight industries. No other material issue comes close to this much commonality. The environmental issue of water and waste water management; the human capital issue of employee health, safety, and well-being in the category of human capital; and the business model and innovation issue of environmental social impacts on assets and operations are each material for four of the eight industries. The industries for which at least two of these three are material issues are electric utilities, water utilities, engineering and construction services, home builders, and real estate. This sector has the least impact on SDGs #1 (No Poverty-8.0), #4 (Quality Education-6.3), and #10 (Reduced Inequalities-6.3). Unlike all of the other sectors written about so far, supply chain management in business model and innovation is not material for any of the industries in this sector and it is an ESG issue that impacts 14 of the SDGs.
The electric utilities and power generators industry (36.4) impacts five of the six SDGs for the sector as a whole, all except for SDG #15. It does so at much a much higher level than the sector as whole: 57.6 for #6, 43.5 for # 7, 57.9 for #11, 51.6 for # 12, and 55.0 for #14. In addition, this industry impacts SDG #16 (Peace, Justice and Strong Institutions-56.5 [eight of 10 targets]). The latter is due to the fact that the social capital issue of human rights and community relations and the leadership and governance issue of regulatory capture and political influence are material for this industry—and it is the only industry in this sector for which this is the case. This industry has 10 material issues, four of which are in the environmental category (GHG emissions, air quality, water and waste water management, and waste and hazardous materials management) and three of which are in the leadership and governance category (systemic risk management, accident and safety management, and regulatory capture and political influence). The remaining three are the only issue in each of their respective categories: human rights and community relations in social capital, employee health and wellbeing in human capital, and lifecycle impacts of products and services in business model and innovation. The SDGs for which this industry has the least impact are #1 (No Poverty-9.1) and #4 (Quality Education-0.0).
The water utilities and services industry (26.6) impacts seven SDGs, only three of which (#6 [39.4 -six of six targets,] #7 [34.8-three of three targets], and #11 [52.6-five of seven targets)] are the ones for the sector. It also impacts #2 (Zero Hunger-50.0 [five of five targets]), #9 (Industry, Innovation and Infrastructure-50.0 [four of five]), and #13 (Climate Action-33.3 [one of three]). For #2 the relevant material issues are water and wastewater management. For #9 the material issues are energy management, access and affordability, lifecycle impacts of products and services, and environmental social impacts on assets and operations. For #13 the material issues are the same as for #9 except for access and affordability. This difference between water utilities and electric utilities (which matches the sector level) shows the importance of doing this analysis at the industry and not just the sector level. The SDGs for which this industry has the least impact are #5 (Gender Equality-11.1), #8 (Decent Work and Economic Growth-4.2), and # 16 (Peace, Justice and Strong Institutions-4.4).
The other utilities industry, gas utilities and distributors, has a much lower impact than the other two (9.9). There are four SDGs from the sector list for which it has the most impact but at lower levels compared to electric utilities: 5.8 for #11 (vs. 57.9), 16.1 for #12 (vs. 26.2), 20.0 for #14 (vs. 31.3), and 17.1 (vs. 28.0). These differences are largely driven by the fact that gas utilities only have two material issues from SASB’s list vs. 10 for electric utilities and six for water utilities. There are six SDGs where this industry has no to minimal impact: 0.0 for #2, #4, and #5; 6.2 for #8, 4.6 for #!, and 4.4 for #16.
Engineering and construction services (24.1) and waste management (23.4) have similar total impact numbers but for different SDGs. Engineering and construction services share #6 (30.3), #11 (36.9), #14 (30.0) and #15 (39.0) with the sector total and at about the same level. The other two SDGs where its impact is high are #2 (35.0) and #9 (33.3). Both of these are shared with water utilities since biodiversity impacts, life cycle impacts of products and services, and environmental social impacts on assets and operations are material issues for both industries. The SDGs for which this industry has the least impact are #8 (12.5 yet it is important for waste management), #12 (Responsible Production and Consumption-10.2), and #16 (13.0).
Waste management only shares #11 (31.6) with engineering and construction services. It shares #7 (34.8) and #11 (31.6) with electric utilities and water utilities. The unique SDGs for this industry compared to all of the other ones in this sector are #3 (Good Health and Wellbeing-41.2)) and #8 (Decent Work and Economic Growth-31.3). Both of these SDGs are impacted by waste and hazardous materials management, employee health and wellbeing, and lifecycle impact of products and services, all of which are material for both industries. Fuel management affects #3 but only for waste management. Labor relations affects both #3 and #8 but waste management is the only industry in this sector for which this issue is material. The least SDGs for waste management are #2 (0.0 yet it is an important one for engineering and construction services, #4 (0.0), #s 1 and 10 (both at 9.1), and #16 (9.4). There are no SDGs ranked at the bottom for all eight industries, although #1 is for seven (not for water utilities) and #8 is for five (not for electric utilities, waste management, and home builders).
Home builders (23.9) and real estate (19.5) have a similar level of impact. They also share SDGs #2, #6, #11 and #14 at about the same level (in the range of 30.0 to 45.0). Distinctive to the former is #15 (41.5) and distinctive to the latter is #7 (Affordable and Clean Energy-30.4), #9 (33.3), and #13 (33.3). For the former, the SDGs on which it has the least impact are #1, #4, #10, and #16, all with a score of less than 5.0. These are also lowly ranked for real estate, along with #5 and #8, again all less than 5.0.
Real estate services (7.1) is similar to gas utilities (9.9) in having a very low impact score. There are six SDGs (#7, #9, #11, #13, #15, and #16) ranked at the top for real estate services but all of these scores are around 15.0 or less. This low impact score is true for most service industries. In a future post I will discuss the nine industries in the service sector (15.7) all of which have very low impact scores except for hotels and lodging (42.4) and cruise lines (30.0). The lowest ranked SDGs for real estate services are #1, #2, #4, #5, and #10 (all at 0.0), #8 (2.1), and #6 (6.1).
In my next post on this topic I will write about the Transportation sector (18.1) comprised of nine industries: automobiles (24.9), auto parts (23.2), car rental and leasing (9.6), airlines (12.6), air freight and logistics (24.7), marine transportation (21.2), rail transportation (13.8), and road transportation (15.0).