Asset owner platform unveils data on EM banks' sustainable portfolios

The SDI AOP released its first dataset on the sector’s sustainable lending practices, to help investors select the best performers.
Asset owner platform unveils data on EM banks' sustainable portfolios

The world’s largest asset owner-led sustainable investment platform has released its first dataset covering sustainable lending practices by banks in Asian and other emerging markets.

The analysis, requested by the members of the Sustainable Development Investment Asset Owner Platform (SDI AOP), whose asset owner members collectively account for $1.5 trillion AUM, was released to AOP members in September.

It measures the portion of emerging market banks’ loan book that is dedicated to serving micro, small and medium enterprises and underserved groups.

James Leaton

Lending to these groups plays a critical role in economic development and the sustainability of emerging market banks’ lending practices is an increasing focus for investors, in part because the importance of the sector in their allocations, James Leaton, head of research at SDI AOP told Asian Investor.

“Data on the exposure of banks is notoriously difficult to find. But these practices link back to [UN’s] SDGs (sustainable development goals) in terms of access to finance.

"The banking sector relates to a lot of investors’ concerns; this sector is an area they wanted to improve on, and it is also part of most portfolios and indices,” he added. 

SDI AOP’s ESG taxonomy analyses 10,216 companies to identify those whose products or services contribute to the UN SGDs, providing asset owner members with an investible universe of equity and fixed income assets.

“These numbers on banks’ loan books will provide comparable data for emerging markets, via a measure that supports economic growth in those economies where there is greater inequality,” he said.

Hans Op’t Veld, chair of the markets and members committee of SDI AOP said the move, as was often the case with expansions of the platform’s investable universe, was initiated in response to demands from investors to have better data on this element of their portfolios.

“Much of the progression in coverage is driven by client demand,” he said.

Leaton said that the focussing on lending to micro, small and medium enterprises, the platform could deliver the comparable data required by investors, noting that there are still major challenges around the comparability of broader sustainability finance metrics indicating sectors supported in emerging markets and beyond.

“How banks define sustainable finance differs between a Chinese, a European or a US bank, and even for banks within a given country. Some [in emerging markets] will include clean coal or gas, some will include their advisory work alongside their lending [in their calculation], some will measure cumulative lending to date, some will measure lending just in the last year. Some will say nothing at all about any of this,” he said.

Leaton also emphasised the importance of balancing the information about socially beneficial lending with other lending activities, which may cause harm.

“There is the negative side. You might have 15% of the loan book that is green, but we need to make sure that 30% of it isn’t going to something negative. That level of transparency isn’t available yet in many cases,” he said.


In addition to the new analysis covering emerging market banks’, SDI AOP’s latest dataset includes two other additional areas of coverage.

The first is analysis of publicly listed real estate investment trusts (REITs) for their social dimension, identifying those REITs which are aligned to healthcare (the third goal of the SDGs) and education (the fourth).

The second is an enhanced analysis of companies’ contribution to the circular economy.

The SDI AOP framework already captures many circular products/services, such as recycling activities, sustainable product alternatives and product-as-a-service offerings.

Hans Op't Veld

The latest version will capture revenue streams from approaches such as closed-loop production systems, as they become material for companies in the AOP universe.

The framework has also expanded its coverage of companies, from 9,258 at the end of last year.

In addition, Op’t Veld pointed to the platform’s development of a data set that looks at the expected progression into sustainable contributions of companies.

“As many companies are in transition, it is interesting to follow the transition path towards becoming more sustainable. We do this by following the efforts companies put into making the transition happen. This informs investors about progress and also helps in company engagement,” he said.

He added that the next expansion of the AOP’s coverage would include details about where companies’ products and services are delivered geographically, and closer monitoring of revenues to evaluate their contribution to SDGs.

“We expect to be releasing first results from this exciting new project we are working on, in the first half of next year,” he said.

SDI AOP was founded by AustralianSuper, PGGM, APG and Canada’s British Columbia Investment Management Corporation (BCI) in 2020; today its members collectively comprise $13 trillion of AUM.

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