Invest in UN SDG 12: Responsible Consumption and Production with ESG ETFs

The United Nations Sustainable Development Goals (SDGs) are 17 goals that all UN Member nations have agreed to achieve by 2030. They set out an ambitious mission to eradicate issues that affect our society and environment. Responsible Consumption and Production have a central place in the UN's agenda through its SDG #12 “Ensure sustainable consumption and production patterns" and underpinned by 11 ambitious targets. In this article, we highlight how you can contribute to UN SDG Goal 12: Responsible Consumption and Production with ESG Exchange-Traded Funds (ETFs).

17 SDGs for a better future

The Sustainable Development Goals (SDGs) are 17 goals with 169 targets set by the United Nations in 2015 as a global initiative to tackle issues that affect humans and the environment we live in, with the hope of achieving tremendous progress by 2030.

The 17 sustainable development goals (SDGs) to transform our world:

1. No Poverty
2. Zero Hunger
3. Good Health and Well-being
4. Quality Education
5. Gender Equality
6. Clean Water and Sanitation
7. Affordable and Clean Energy
8. Decent Work and Economic Growth
9. Industry, Innovation and Infrastructure
10. Reduced Inequality
11. Sustainable Cities and Communities
12. Responsible Consumption and Production
13. Climate Action
14. Life Below Water
15. Life on Land
16. Peace and Justice Strong Institutions
17. Partnerships to achieve the Goal

Each goal has several targets and is measured quantitatively by indicators provided by private and public entities. Creativity, know-how, technology, and financial resources from all stakeholders are necessary to achieve the SDGs in every context. The beauty of these goals is their interrelation, meaning that action in one area will affect outcomes in others. The development of those goals must balance social, economic, and environmental sustainability.

To fully meet the 17 Sustainable Development Goals, the United Nations Conference on Trade and Development (UNCTAD) estimates that an investment of $3.9 trillion is needed on average each year from 2015 to 2030 for the developing nations alone.

What is UN SDG GOAL #12: Responsible Consumption and Production?

The growing global population has increased demand for natural resources — inflicting climate change, harming nature, and rising pollution levels. According to the United Nations, around 14% of the worlds’ food is lost along the supply chain before arriving in the end market. Humans purchase 1 million plastic drinking bottles every minute and throw away 5 trillion single-use plastic bags each year. Our increased dependency on electronics has added to the waste bucket — around 7.3 kilograms of e-waste per capita in 2019, of which only 1.7 kilograms was documented to have been managed in an environmentally sustainable way.

Overall, data indicate a rise of almost 40% in the global material footprint per capita, from 8.8 metric tons in 2000 to 12.2 metric tons in 2017. Similarly, domestic material consumption per capita increased by more than 40%, from 8.7 metric tons in 2000 to 12.2 metric tons in 2017.

These consumption trends have prompted the United Nations and all the stakeholders to take action under SDG Goal #12: Responsible Consumption and Production. It is meant to ensure good use of resources, improve energy efficiency, sustainable infrastructure, provide access to basic services, green and decent jobs, and ensure a better quality of life for all.

SDG #12 has 11 targets set for completion by 2030:

1. Implement the 10-year sustainable consumption and production framework.
2. Sustainable management and use of natural resources.
3. Halve global per capita food waste.
4. Responsible management of chemicals and waste.
5. Substantially reduce waste generation.
6. Encourage companies to adopt sustainable practices and sustainability reporting.
7. Promote sustainable public procurement practices.
8. Promote a universal understanding of sustainable lifestyles.
9. Support developing countries' scientific and technological capacity for sustainable consumption and production.
10. Develop and implement tools to monitor sustainable tourism.
11. Remove market distortions that encourage wasteful consumption.

To track progress, the United Nations along with all related stakeholders have established 13 statistical indicators attached to each target. It helps parties adapt and improve actions toward making the goal attainable by 2030. These indicators can be tracked on the SDG Tracker.

Investors can promote Responsible Consumption and Production with ESG ETFs

Today, impact investing has become the norm, with billions of dollars injected in the market in adequately screened investments, focusing on entities that align their activities with SDG and ESG initiatives (Environmental, Social, Governance). Corporate Social Responsibility departments (CSR) went from being a cost burden to an existential necessity that represents employees' and consumers' values.

The change in investors' mindsets has given birth to mutual funds and ETFs that provide exposure to securities that work towards achieving ESG or SDG goals. It allows them to invest in opportunities that can provide wealth accumulation while making an impact.

List of ESG ETFs promoting Responsible Consumption and Production

Trackinsight analyzes the fact sheets and other publicly available information of all ETFs in the ESG universe. The information is screened for statements that show an explicit tilt towards specific Sustainable Development Goals. In relation to the "Responsible Consumption and Production" goal, Trackinsight identifies 4 ETFs totaling $495 million in assets.

ETFs supporting SDG #12 ranked by assets under management

• BNP Paribas Easy ECPI Circular Economy Leaders UCITS ETF (REUSE) - $500 million
• Direxion World Without Waste ETF (WWOW) - $5.36 million
• Amplify Cleaner Living ETF (ARCX:DTOX) - $1.00 million
• HANetf Cleaner Living ESG-S UCITS ETF (XLON:DTOX) – $0.84 million

BNP Paribas Easy ECPI Circular Economy Leaders UCITS ETF (REUSE) is a passive fund that seeks to track the ECPI Circular Economy Leaders Equity (NR) index. The index includes companies engaged in the circular economy — have positive ESG ratings and focus their efforts to reduce their exposure to coal and unconventional fossil fuels. Hence, companies involved in sectors with a potentially high negative ESG impact, those who have violated one of the UN Global Compact principles, and those involved in severe ESG-related controversies are excluded from the Index.

A circular economy is a model of production and consumption, which focuses on sharing, leasing, reusing, repairing, refurbishing, and recycling existing materials and products as long as possible. According to research by Accenture, a circular economy could generate $4.5 trillion of additional economic output by 2030, and the International Labor Organization predicts it could generate 18 million new jobs by then too.

 The fund's latest fact sheet (November 30th, 2021) shows that the United States (63%) has the highest allocation, followed by Japan (11.6%), France (9.46%), and The Netherlands (8.17%). In terms of sectors, Consumer Discretionary (23.92%) has the biggest slice. Next in line are Information Technology (22.83%), Industrials (19.49%), Consumer Staples (19.05%) and Materials (12.94%).

The leading 10 names including Advanced Micro Devices (3.41%), NVIDIA (3.12%), Ford Motor (2.57%), Intuit Inc. (2.53%), Lowes Companies (2.45%), Autozone (2.25%), Koninkilijke DSM NV (2.21%), Waste Management (2.20%), ASML Holding NV (2.20%) and Adobe (2.18%) make up about 25% of net assets.

In 2021, the fund has generated a positive return of +35.86%, beating most of the European indices like CAC 40 (+28,8%), BEL 20 (+19%), DAX 40 (+16%), ITA 40 (+23%) and the Euro STOXX 50 (+21%) among others. For interested investors, the fund has a net expense ratio of 0.30% and trades on the Euronext Paris and Borsa Italiana.

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