SDG-aligned revenues show strong growth since 2020

The SDI classification based on revenues reflects our belief that focusing on this type of fundamental metric brings together sustainability and financial materiality for a company. We have looked back over recent years to understand if our thesis that SDI-aligned companies show strong growth characteristics holds true.

Organic SDI revenue growth outperforms

Results show that 58% of the entities present in the SDI universe since 2020 have seen revenue growth of more than 10%. Given the challenges COVID-19 posed to most economies over this period, growth of more than 10% can be considered outperformance. Another 18% have added SDI revenues from a zero baseline in 2020. This may be due to the companies adding or acquiring new business lines, or the addition of new SDI taxonomy rules, (eg production of critical minerals for the energy transition).

Sustainability growth themes show resilience

There is an energy transition story to the growth with renewables and electric vehicle related technologies being a strong driver. Alongside this healthcare and pharma have experienced sustained growth as well as water and food related products and services. This shows how meeting these human needs for health, energy, food and water can drive value and be resilient to events such as the COVID-19 pandemic. The most exponential growth was most commonly seen in the Biotechnology industry which has the potential for new solutions to rapidly scale. Poorer performers tended to be those in highly regulated areas which restricts growth potential.

Transition underway within companies

We find that companies which only have a minority share of SDI revenues have greater potential for them to grow the contribution of these business segments to benefit from sustainability trends. As expected we saw average SDI revenue share increase by 9% for companies with less than 50% of SDI revenues in 2020, that were classified as SDI in 2023. SDI majority companies already have more than 50% of revenues aligned with SDI products and services, which limits the potential for increasing the proportion of SDI revenues at a company.

James Leaton, Research Directie SDI AOP commented: “The findings of the SDI sector's revenue growth since 2020 underscore the resilience and adaptability of companies aligning with sustainable practices. Despite external challenges, the overall trajectory is positive, with ample opportunities for growth and transformation. As sustainability themes continue to influence market dynamics, being well positioned for these trends is crucial for businesses and investors”.