Manulife Investment Management & John Hancock Digital Advice
Industry: Investment Management
Primary SDG Focus
Secondary SDG Focus
Please summarize your company’s SDG focus, how was that SDG was implemented and how did achieved and measured the impact.
Manulife Asset Management (subsidiary of Manulife Financial Corporation) has developed a Sustainable Development Goals Assessment Methodology (SDG Assessment Methodology) that provides a transparent and scalable process for assessing companies’ commitments and contributions towards achieving the SDGs, comparing a broad universe of companies against one another, and identifying corporate leaders in a given universe based on the relative strength of their commitments and contributions. This enables investors to align with and contribute to achievement of the SDGs through their company selection/portfolio construction. The Methodology uses key performance indicators to measure and quantify the degree of SDG alignment of a company by focusing on that company’s goals, business revenues, and corporate conduct.
Our group affiliate company, John Hancock Digital Advice, is helping people make their investment decisions in a way that expresses their values and supports the SDGs through the Conscious Investing platform (‘COIN’). We apply the SDG Assessment Methodology to define investment recommendations that are offered to COIN customers. Through investing in these recommendations, COIN investors can signal their preference that companies measure and report on the social and environmental impact of their products and services, and explicitly state their intention to contribute to a sustainable development agenda. COIN enables a level of customization that allows investors to focus on chosen SDG-related themes.
Employee engagement and awareness of COIN is a long-term strategy for Manulife and COIN. Our launch week featured company-wide e-mails across North America to over 6000 employees with about an 80% e-mail open rate. Our internal home page featured an introduction to COIN across our offices in North America, Asia, and Europe.
Further, COIN is measuring the impact achieved through its SDG-aligned investor offering by the level of interest generated, expressed through the number of account openings and the amount of funds invested. For more information, please visit: https://www.investwithcoin.com/how-it-works.
How was your primary SDG focus identified and prioritized in the company’s value chain?
Manulife Asset Management is committed to responsible investment, and as part of this we have noted with interest that the SDGs are emerging as a preferred framework for sustainable investment seeking to contribute to positive development outcomes. The SDGs provide a viable roadmap to sustainable development that promotes an active role for the private sector. Importantly, the SDGs have the potential to extend the concept and practice of ‘impact investing’ to public markets, which to date has remained mostly elusive for investors seeking to generate positive environmental and social impact by deploying capital in this area of the global investable markets.
Our primary SDG focus (Partnership for the Goals) manifests in our role to empower our clients to allocate capital to sustainable development in high quality, transparent investment products/solutions. Providing these solutions aligns with our belief that, over the long-term, large public companies can pursue the commercial opportunities defined by the SDGs to support their growth.
COIN, our John Hancock digital advisor platform, identified that there was a gap in the retail investment market, specifically online- and robo-advisors, for solutions that empower investors to make a difference with their money. The COIN offering is targeting “conscious investors”, even those with no investment experience or knowledge, to empower the individual to take control of their money and the impact it can make. The COIN platform facilitates entry into wealth management for individuals with small amounts of capital to invest, aligning their capital with SDG thematic areas of their choice.
How was your primary SDG integrated and anchored throughout your business?
Our primary SDG, Partnership for the Goals, is integrated and anchored in the collaboration between Manulife Asset Management and John Hancock Digital Advice to launch the digital advisor platform COIN (‘Conscious Investing’). The COIN website educates customers on the SDGs as part of its education mission. COIN assists investors to choose their preferred SDG themes, or impact areas, to invest in curated, personalized lists of companies that help align their investments with their values. COIN aims to empower even those with no investment experience or knowledge.
COIN’s strategy of direct-to-consumer wealth management for new investors is a key pillar of John Hancock’s Digital Advice product offering. The joint effort between Manulife Asset Management and John Hancock Digital Advice have helped raise awareness for the SDGs across Manulife, including at the senior management level. COIN’s product offering, and Manulife Asset Management’s SDG Assessment Methodology enjoy broad organizational support and awareness.
Did you employ any innovative approaches in your efforts to implement the goal?
The offering of SDG-aligned thematic investments was an exercise in innovation. Firstly, Manulife Asset Management developed a thorough, sophisticated methodology to assess companies’ SDG-alignment, leveraging numerous data sources and proprietary research, the SDG Assessment Methodology. Secondly, the COIN investing platform enables conscious investors to enter the capital markets even with small amounts of capital, which in aggregate signals public support for the SDGs.
Regarding the SDG Assessment Methodology: we found that the ability to measure and quantify impact varies significantly across companies and SDG theme. However, despite the early stage of corporate reporting on the SDGs, it remains possible to identify proxy key performance indicators (KPIs) that address many of the sub-goals of the SDGs. Our efforts are focused on defining the KPIs that support measurement and reporting of impact. These KPIs are often industry-specific and address a selected number of the SDGs relevant to that industry or the sustainable business theme. Building out a KPI-driven assessment model is, to our understanding, unique among investment managers to date.
The COIN platform asks customers to identify their values and builds a model portfolio for each investor based on their unique preferences. Investors can achieve alignment of their portfolios and values in a way typically not offered to individual investors. To do this, COIN developed a new technology infrastructure that allows highly customized portfolios to be available to the mass market. This involves fractional share trading, automatic rebalancing, and a unique capability for creating custom models, all at mass scale.
The COIN platform is the first internal start-up that was able to launch a direct-to-consumer offering through John Hancock Digital Advice. This demonstrates a strong level of support from Manulife, as well the progress is reported directly to the executive team at John Hancock and the Sustainability Executive Committee at Manulife.
Were any partnerships leveraged or created?
By conducting a deep dive into the Sustainable Development Goals for the creation of a meaningful SDG Assessment Methodology, we reached out to many partners working towards various aspects of the SDGs. For example, the World Benchmarking Alliance, in which Manulife Asset Management is participating, has set out to develop benchmarks to compare company performance on the SDGs, which will further empower investors to allocate capital toward the SDGs. The benchmarks will be free to use and will be based on input from a multi-stakeholder dialogue.
Based on our ground-breaking work to map the SDGs to listed company performance to inform potential investment strategies, we were invited to submit a chapter for an upcoming publication on the SDGs about our methodology and findings. The book, Harnessing Business to Achieve the Sustainable Development Goals through Technology, Innovation and Financing, will be published by Wiley for commercial distribution in 2019.
In addition, COIN developed several new partnerships that have helped create the platform which empowers individual investors to align their personal investments with the SDGs. One example is COIN’s partnership with Trizic, Inc. to develop the capability to create custom model portfolios utilizing fractional shares and automatic portfolio rebalancing.
We project increased effort and coordination among financial market participants to measure and incentivize corporate behavior that promotes a sustainable future. For example, other initiatives related to SDG impact measurement have emerged as resources for investors to use, including the Sustainable Development Goals Investment Initiative (SDGI) and the PRI SDG Advisory Committee.
What communications strategy did you employ to share the initiative with your stakeholders?
Our SDG-aligned investing solution, COIN, directly markets to individual consumers, educating people that they can make both smart investment decisions and invest in a way that supports the SDGs. As COIN launches nationally across the US, it will hold a series of live events and communications to notify stakeholders of the newly launched impact investing platform. The first event will take place on International Women’s Day in San Francisco and will draw attention to SDG 5, gender equality, and the importance of women and gender equality in business.
In addition to the communications strategy employed by the COIN team, Manulife Asset Management is actively communicating with stakeholders on SDG-aligned investing for public markets. For example, the forthcoming publication, Harnessing Business to Achieve the Sustainable Development Goals through Technology, Innovation and Financing, to be published by Wiley for commercial distribution in 2019.
Further, Manulife Asset Management participates in working groups related to the SDGs and impact investing and is often invited to consult on the SDGs from an investor perspective. For example, in further pursuit of ongoing improvements to the SDG Assessment Methodology, Manulife Asset Management has become a member of the World Benchmarking Alliance (WBA), which is seeking to build out benchmarks to measure and effectively report on corporate progress towards the SDGs over the next 5 years. Manulife Asset Management has already joined two WBA working groups focused on climate change and gender, providing an investor perspective on company alignment to these themes.
How were KPIs and the levels of success outlined and defined?
The core of Manulife Asset Management’s SDG Assessment Methodology is an evaluation of company performance against three weighted pillars which, when combined, generate an SDG Alignment Assessment for each Investment Theme. To develop the SDG Assessment Methodology, we leveraged such tools as the SDG Matrix and the SDG Compass, in addition to other sources.
The pillars are described as follows:
- Goals, Targets and Progress: This pillar assesses a company’s level of commitment to the SDGs through the public communication of goals/targets and progress achieved. Our aim with this pillar is to capture the company’s commitment to generate future positive impact, and to hold them accountable to their ambitions through measurement of progress achieved.
- Business Opportunity: This pillar assesses companies’ current capture of SDG-related business opportunities through identifying revenues derived from products and services contributing to absolute positive environmental or social impacts. Products and services that detract from the SDGs are counter-balanced against the positive impact.
- Corporate Conduct: This pillar captures the degree to which a company’s operations and corporate conduct are consistent with the SDGs overall, with a strong emphasis on operational alignment with the SDGs relevant to a given Investment Theme. This pillar recognizes that beyond capturing absolute positive impact through products and services, companies’ operations and supply chains also have a key role to play in achieving the SDGs, and that for some Investment Themes the main SDG-relevant impacts originate from corporate conduct (for example gender diversity and safe work).
How were reporting and monitoring conceptualized and undertaken?
Our analysis and research found that the ability to measure and quantify impact varies significantly across companies and Investment Theme. Despite the early stage of corporate reporting on the SDGs, it remains possible to identify proxy key performance indicators (KPIs) that address many of the sub-goals of the SDGs.
Our evaluation of a comprehensive set of potential KPIs identified the most significant and relevant ones for certain sustainable investment themes, which were also industry-specific where necessary. For example, assessment of business opportunity capture for our ‘Modern Cities’ Investment Theme included green building revenues for real estate companies (addressing the green, low carbon infrastructure opportunity) to privacy and data security revenues for technology and information security companies (addressing the opportunity to ensure that connected, smart cities also remain safe). Further, assessment of corporate conduct for the ‘Reduce, Reuse, Recycle’ Investment Theme encompassed a wide range of indicators, from sustainable forestry certifications for raw material use (relevant to paper products and household products companies) to use of eco-design principles in product design (relevant to semiconductors, technology hardware, textiles, consumer durables, homebuilders, etc.). Our efforts also focused on defining the KPIs that support measurement and reporting of impact.
Our research supported the value of an industry-relative approach to the SDGs, and that seeking to assess companies on SDG alignment ‘overall’ or across all 17 of the SDGs has dangers of over-simplifying real-world complexity and reducing the SDGs to a set of compliance-oriented reporting objectives rather than a strategic business planning framework.
What were some key lessons learned?
We analyzed the application of the SDG Assessment Methodology to a highly-liquid, large-cap universe of around 500 US-listed stocks. We sought to understand what kinds of SDG alignment can be achieved through investing in this asset class. We concluded that the current nascent state of corporate SDG practice and disclosure means no single analytical pillar (goals, business opportunity, or corporate conduct) is sufficient to construct concentrated and thematic SDG-aligned portfolios. More than one lens of analysis is necessary to identify SDG-aligned companies from a country-based universe of large-cap companies. We noted that not only does company data availability and quality still need improvement, there are instances where the SDG goals are not easily translated into metrics achievable by companies.
Through COIN’s market-based research, we learned that the language of the SDGs needed to be adapted for a retail audience new to investing and the SDGs. Using personal investment decisions as a method for contributing to global change is a new concept. COIN continues to explore ways to educate and motivate investor action towards the SDGs. The COIN team performed broad market research to identify SDG themes in demand. To solve for COIN’s target consumer needs, we created eight investable Impact Areas that align to the SDGs.
The scope of the SDGs is large and connecting an individual investor’s personal concept of values to the SDGs will require continued iteration on both COIN’s value assessment and advice model, as well as our SDG Assessment Methodology.
What were the key impacts and results?
Our work helped us form new partnerships with stakeholders at all levels, which will enable us to continually improve the quality of our SDG Assessment Methodology and solutions, and therefore our overall impact. While COIN, our SDG-aligned investing solution for individuals, is still in its early roll-out phase, our market surveys indicate significant interest from individual investors.
By introducing a new way for individual investors to take personal action towards advancing the Sustainable Development Goals, we seek to motivate action and support the Goals. We would advocate that our unique combination of both methodology innovation and technology innovation is critical for advancing action at a meaningful scale. COIN provides a level of customization that allows investors to focus on chosen SDG-related themes and signal their preference that companies measure and report on the social and environmental impact of their products and services, and explicitly state their intention to contribute to a sustainable development agenda.
Our partnership with COIN provides a unique opportunity to gain retail market research insights on the appeal of the SDGs. This market research will inform our teams on additional projects such as expanding our investable universe, adjusting Impact Area alignments, or developing customer Impact reporting.
COIN is measuring the impact achieved through its SDG-aligned investor offering by the level of interest generated, expressed through the number of account openings and the amount of funds invested. For more information, please visit: https://www.investwithcoin.com/how-it-works.
In order to further advance the SDGs through COIN, several metrics are tracked such as customer interest in the various Impact Areas, average account size and number of accounts. COIN has experienced an initial average account size 3 times as large as expected with our launch population. Due to it being early in the launch, we expect the average initial AUM to decrease as more customers come on board. We have seen customers invest in all our Impact Areas and select 53 of the 56 portfolio combinations we offer already.
Over time, we aim to democratize the investment process and use our tracked metrics to better understand our customer base and continue education on impact investing and the SDGs.