Investors urged to engage with Sustainable Development Goals
Investors have been urged to support the "world's most pressing environmental, social and economic issues" by using the Sustainable Development Goals (SDGs) as a capital allocation guide.
A new report published by the Principles for Responsible Investment (PRI) and PwC found that the majority of investors are failing to allocate funding opportunities to environmental or social projects and companies.
According to the report, the SDGs should serve as a list of material ESG factors that should be considered as part of investor’s fiduciary duty, while simultaneously boosting their financial performance by energising sustainable economies and markets.
“The SDGs will have an important impact on the future development of the economy and financial markets,” PRI’s director of investment practice and engagement Kris Douma said.
“As drivers of global GDP growth, they are relevant for investors. For institutional investors who consider themselves as ‘universal owners’, not meeting the SDGs will potentially bring macro financial risks.”
Just 17% of PRI signatories are funnelling investment into ESG areas such as renewable energy, clean technology and affordable housing. The report notes that current political and climate concerns may impact company accounts and investing into projects aligned to the SDGs would serve as a way to future proof portfolios.
The report also notes that the SDGs will be a fundamental driver of long-term economic growth, which would increase corporate revenues and equities and assets for investors. Notably, the report claimed that the SDGs would give investors a “common language” to shape sector-wide strategies.
The UN Commission on Trade Development (UNCTAD) estimates that up to $7trn of investment will be needed annually to meet the SDGs by 2030. However, government spending is expected to reach $1trn annually, and investors have been urged to reduce the deficit.
Unilever’s chief executive Paul Polman is listed in the report, claiming that “the SDGs offer the greatest economic opportunity of a lifetime”. The message is similar to the core preamble to the Principles for Responsible Investment of 2006, which claims that investors “recognise that applying these Principles may better align investors with broader objectives of society”.
While investors are backing the climate-related recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), the SDGs remain an under-explored area in the sector. The report outlines some investors that are leading the way in this area. Dutch pension managers APG and PGGM have linked investment opportunities to 13 of the 17 SDGs.
Elsewhere, the World Bank issued its first ever set of green bonds that directly link financial returns to companies performing to the standards and aims on the SDGs.
PwC’s global sustainability director Louise Scott said: “The SDGs present an enormous growth opportunity for investors, organisations and the global economy. Solving them will mitigate the risks that they pose to all businesses. Every investor should want to understand how to play their part in achieving them.”
In the Better Business, Better World report, the Business & Sustainable Development Commission – a group of more than 35 influential chief executives and civil society leaders - claimed that $12trn and 380 million jobs could be generated by 2030 if the SDGs are placed at the heart of global economic strategies.