Influential corporate leaders and fund managers from around the world recently held an inaugural meeting in New York in preparation to launch the world’s first unified initiative to identify, authenticate, and measure the impact of investments that advance the Sustainable Development Goals (SDGs).
“Achieving the SDGs will require investment on an unprecedented scale—which we cannot afford not to make. That means unlocking private capital by helping enterprises and investors identify and report on SDG-aligned business opportunities,” UNDP Administrator and SDG Impact Steering Group Chair Achim Steiner told Steering Group members at UNDP headquarters on 20 June.
“The US$12 trillion needed to achieve the SDGs exists, but isn’t yet going where it’s needed most. SDG Impact, with guidance from our eminent Steering Group, will fill a critical gap by standardizing how companies and investors evaluate, and report on corporate commitments to the SDGs.”
By establishing consistent SDG standards for assets managers, enterprises, and bond issuers, SDG Impact aims to mainstream capital into agriculture, cities, energy, and health, catalyzing up to US$1 trillion annually in private investment to achieve the goals. According to the Business Commission on Sustainable Development at Davos, achieving the SDGs could open up an estimated US$12 trillion in market opportunities and create 380 million new jobs.
“The SDGs are the business plan for people and the planet,” Anna Ryott, a Steering Group member and Board Chair of Stockholm-based Summa Equity, said. “Investments can be both profitable and sustainable. SDG Impact will help to streamline the process of identifying these opportunities, as well as measuring and certifying their impact.”
All 193 United Nations Member States came together in 2015 to endorse the SDGs—17 specific, time-bound targets aimed not simply at halting or mitigating threats to people and planet but at creating a better world for all. Achieving the goals in developing countries will likely require investments of about US$2.5 trillion per year, far more than what governments or foreign assistance can deliver. According to the OECD, official development assistance (ODA) was US$146.6 billion in 2017. By comparison, foreign direct investment (FDI) flows to developing economies totaled US$671 billion in the same year, quadruple the figure for official aid.
“Numerous studies have shown that integrating environmental, social, and governance issues and addressing material sustainability impacts translates into financial returns. Businesses that make smarter use of resources such as energy, water, and materials, and smarter investments in human capital will see large efficiency gains as well as cost savings,” Steiner said.
The business case
Enterprises and investment firms that prioritize sustainability are growing fast. In the 12 years since the UN-backed Principles for Responsible Investment (PRI) launched, the number of investment firms committed to sustainability grew from 63 with US$6.5 trillion to 1,715 with US $81.7 trillion in assets under management.
A major obstacle to greater SDG-aligned investment, however, has been that benchmarking, reporting, and auditing of corporate commitments to sustainability is neither standardized nor mandatory.
In partnership with the Impact Management Project, SDG Impact is developing new tools and products aimed at enabling investments aligned with the SDGs. These are:
· A set of globally accepted standards for how investors and enterprises manage and evaluate their SDG impacts. These standards will form the basis for third-party certification of SDG-enabling investments;
· Market intelligence and data in the form of SDG Investor Maps to help developing countries attract private investment that tangibly advances the SDGs. These will translate national priorities into investment opportunities, providing data that highlights the business case and development impact of such investments;
· Based on these investor maps, UNDP country offices and their partners will convene SDG investor fora, which will allow “matchmaking” between the investment community and policy makers, facilitating discussion of required policy measures to scale-up sustainable investments.
Through its partnership with the Oslo-based Business for Peace Foundation, UNDP is piloting SDG-enabling standards with an elite group of Nordic investors.
The private sector generates 60 percent of gross domestic product, 90 percent of jobs, and 80 percent of capital flows in the average developing country, providing innovation and generating much-needed tax revenue. But private investment in developing economies remains low, with the world’s 47 least developed countries receiving just two percent of FDI in 2017, or US$26 million.
Research has demonstrated a strong business case for private sector engagement in achieving the SDGs. Developing products and services for underserved markets leads to new customers, jobs, and market opportunities while companies that use resources more efficiently will save money and those that treat workers equally and fairly will improve their reputation and be able to tap the widest possible labor and customer pools.
This September, Heads of State and Governments will gather at UN Headquarters for an SDG Summit for the first time since Member States agreed to the 17 targets in 2015 and committed to achieving them by 2030.
SDG Impact Steering Group members
Chair: Achim Steiner became UNDP Administrator on 19 June 2017 and will serve for a term of four years. The United Nations General Assembly confirmed his nomination on 19 April 2017, following his nomination by Secretary-General António Guterres. Steiner is also Vice-Chair of the UN Sustainable Development Group, which unites 40 entities of the UN system that work to support sustainable development. He previously served as Executive Director of the United Nations Environment Programme (UNEP).
Sir Ronald Cohen serves as Chairman of the Global Steering Group for Impact Investment, the Education Outcomes Fund for Africa and the Middle East, and The Portland Trust. He is a co-founder of Social Finance UK, USA, and Israel, and co-founder of Bridges Fund Management and Big Society Capital. He chaired the G8 Social Impact Investment Taskforce (2013-2015), UK Social Investment Task Force (2000-2010), and UK Commission on Unclaimed Assets (2005-2007). In 2012 he received the Rockefeller Foundation’s Innovation Award for Social Finance. He was a co-founder and Executive Chairman of Apax Partners Worldwide LLP (1972-2005), a global private equity firm.
John W.H. Denton, Secretary-General, International Chamber of Commerce, served previously as Partner and CEO of Corrs Chambers Westgarth, Australia’s leading independent law firm. He is a Board member of IFM Global investors—one of the world’s major infrastructure investors—and a founding member of the B20, the Australia-China CEO Roundtable, and Australia for UNHCR.
Cheo Hock Kuan is Executive Director & CEO, Temasek Trust, which oversees the financial management of gifts and endowments from Temasek and other donors. As CEO, she is responsible for charting Temasek Trust’s strategic path, spearheading and establishing its role as thought partner and convener in the areas of philanthropy, sustainability, and impact investing.
Denise Hills, Chief Sustainability Adviser, Itaú Unibanco, has 30 years’ experience in the financial market, including Treasury and Corporate Finance, Risk Management, Investment, Investors Relations, Financial Planning, Wealth Management, and Innovation. She became head of the Sustainability and Inclusive Business, which includes Microcredit and Women Entrepreneurs programs, at Itaú Unibanco, in 2010.
Anna Ryott is Board Chair at Summa Equity, which uses investments to create a better world and at the same time deliver high returns. She is also on the board of the Norrsken Foundation, Axel Johnson AB, UNF Global Entrepreneurs Council, the World Childhood Foundation, and the Stockholm Sustainable Finance Center. She has served as secretary-general of SOS Children’s Villages and a management consultant at McKinsey & Co. Ryott was named Sweden’s most powerful female change-maker in 2018 by Veckans Affärer.
Dr. Amy Jadesimi, CEO of LADOL, received financial training at Goldman Sachs and the Stanford Graduate School of Business, and medical training at Oxford University. She was named one of the Top 50 Women in Technology by Forbes in 2018 and one of Top 25 Africans to Watch by The Financial Times. LADOL is developing the first and largest industrial-free zone in Nigeria. It has attracted US$500 million in investment and turned a disused swamp inside the busiest Port in West Africa into a modern, sustainable, industrial-free zone.
Dr. Ma Weihua served previously as Executive Director, President, and CEO of China Merchants Bank (CMB) and is Chair of the National Fund for Technology Transfer and Commercialization (NFTTC), China Alliance of Social Value Investment (CASVI), China Global Philanthropy Institute (CGPI), and One Foundation. During his 14-year term as CMB’s President, he expanded total assets, deposits, loans, and net operating income by 25 times and reduced non-performing loan from 20 percent to 0.66 percent.
Lisa Genasci is Founder and CEO of ADM Capital Foundation (ADMCF), an innovative philanthropic vehicle to support critical research and impact-driven approaches to promoting environmental conservation in Asia. ADMCF has been widely recognized for its work on solutions to some of our most intransigent challenges, including depleted oceans, the nexus between forestry and development, air quality, and public health. She is a founder, with the ADM group, of the Tropical Landscapes Finance Facility (TLFF).
Daniel Hanna is Global Head of Sustainable Finance and the Global Head of Public Sector & Development Organizations, Standard Chartered Bank. He has two decades of banking experience in emerging markets advising governments, state-owned enterprises, and development finance institutions on their credit ratings, raising equity and debt, restructuring business activities, and investing in emerging markets. He has helped emerging and frontier market sovereigns raise billions of dollars for infrastructure and social development, ed innovative financing transactions, and worked with development finance institutions to mobilize more than US$5 billion in commercial capital toward the SDGs.
Dr. Rajiv Lall, Chairman, IDFC First Bank, was Founder, Managing Director, and CEO of IDFC Bank. A veteran economist, he has straddled leadership roles both in business and in public policy. His expertise spans macro-economics, banking, capital markets, infrastructure finance, private equity, venture capital, and social impact investing, with a focus on emerging markets including India and China. Prior to joining IDFC, Dr. Lall was a partner with Warburg Pincus, New York; Head of Asian Economics Research with Morgan Stanley; and an economist at the World Bank and Asian Development Bank.