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Can SDGs be met?
Can SDGs be met?

Can SDGs be met?


The Sustainable Development Goals (SDGs) are both a massive challenge and a huge opportunity - but they will only be achieved if investors and companies work together

The SDGs are an ambitious set of targets to make the world a better place. The United Nations Development Programme (UNDP) calls them “a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity”.

They are also a massive economic opportunity – the Business and Sustainable Development Commission says that putting the SDGs at the heart of the world’s economic strategy could open economic opportunities worth up to USD12 trillion and increase employment by up to 380 million jobs by 2030, unleashing a step-change in growth and productivity, with an investment boom in sustainable infrastructure as a critical driver[1].

The 17 goals appear, at first glance, to be quite straightforward, encompassing issues such as poverty, hunger, equality, education, clean water, climate action and clean energy. However, they present a particular set of challenges for businesses and investors, in part because they are so specific and have a strict deadline of 2030.

Many companies looking to incorporate the SDGs into their strategies seek to focus on those that are most aligned with their business and core values. But it is very difficult to isolate particular goals – as the UNDP says, “the goals are interconnected – often the key to success on one will involve tackling issues more commonly associated with another”[2].

SDGs as part of investors’ fiduciary duty

For investors the issue is even more complicated as they try to balance the desire to encourage the companies whose shares they own to do the right thing with the need to earn returns for their beneficiaries.

However, this does not mean that investors can ignore the goals. The launch of the SDGs in 2015 “made clear that the global community of countries relies heavily on the private sector to solve some of the most urgent problems the world is facing”, said a report from the Principles for Responsible Investment (PRI)[3]. The report further stated that it expects 90% of the capital required to meet the targets to come from the private sector.

The PRI says that helping to meet the goals is part of investors’ fiduciary duty to act in the best interests of beneficiaries by considering environmental, social and governance (ESG) issues.

They frame both the key risks investors will face in the years ahead and the opportunities, at both macro and micro levels. At the macro level, universal investors have an interest in making the entire economy more sustainable to both reduce the risks they face and create opportunities by driving economic growth.

At the micro level, the PRI says “the challenges put forward by the SDGs reflect that there are very specific regulatory, ethical and operational risks which can be financially material across industries, companies, regions and countries”. Equally, “if investors believe that providing solutions to sustainability challenges offers attractive investment opportunities, they can implement investment strategies that explicitly target SDG themes and sectors”. Opportunities are available in asset classes such as clean technology stocks in listed equity, private equity and venture capital; low-carbon infrastructure; green bonds; green real estate, sustainable forestry and agriculture.

By offering finance to all sectors, BNP Paribas “is one of a small number of the few economic actors that have the privilege of contributing to all SDGs”, says Laurence Pessez, head of corporate social responsibility at BNP Paribas.

“Our clients have to adapt to a changing world, and that includes taking into account the SDGs. We have to take them into account in our operations, too,” says Florence Fontan, global head of Asset Owners at BNP Paribas Securities Services.

“But the SDGs have a very specific time frame, so we want to be specific about how we meet our targets and we have to be clear about how we align our portfolio with the goals.”

Florence Fontan, global head of Asset Owners at BNP Paribas Securities Services

The bank has a target that at least 15% of its credit commitments must go to companies “that contribute strictly to the achievement of the SDGs” in 2018.

380 million more jobs by 2030 if SDGs are put at the heart of global economic strategy

Source: Business and Sustainable Development Commission

Where to start with SDGs?

The SDGs are so wide-ranging that it can be difficult to know where to start, but there are a number of tools to help companies and investors get to grips with the process.

Bob Eccles, visiting professor of management practice at Oxford University’s Saïd Business School and a renowned expert on sustainable finance, says that companies can use the standards of the Sustainability Accounting Standards Board (SASB) to assess the impact they are having on the goals[4].

He says that we can advance the achievement of SDGs by improving ESG outcomes through this three-step process:

  • Understand which ESG outcomes are material for a company
  • Determine how performance on these outcomes contributes to one or more SDGs
  • Track improvements in performance on these ESG outcomes that impact the SDGs

For investors, it is more difficult because they hold large portfolios of companies and must aggregate information about all of them individually, as well as consider the system-level effects of their investments. The World Bank’s Atlas of Sustainable Development Goals[5] can help investors to understand the progress that different countries have made towards the 17 goals and where they are likely to focus future efforts.

The World Business Council for Sustainable Development has an SDG Resources Hub[6] that highlights the tools and resources available to support business in navigating the dynamic SDG agenda, while a new report from The Investment Integration Project[7] gives investors a breakthrough roadmap for measuring the effectiveness of system-level investing strategies, including the progress being made towards achieving the SDGs.

Mr Eccles says: “If only a few asset owners and asset managers, even the largest ones in the world, focus on and measure the system-level effects of their investments, we won’t get the results we need.”

Co-operation and collaboration between investors and the companies they invest in will be crucial to meeting the SDGs. Much has been achieved already, but there is still a long way to go to get to where we need to be.

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