The UN Agenda 2030, with its 17 historic Global Goals, was signed into action by governments – but these historic targets also hold unique opportunities for investors and businesses.
Also known as the Sustainable Development Goals (SDGs), they were chosen as the way forward by the heads of 193 states. Investors and businesses have a key part to play in their attainment. Moreover, the SDGs offer unprecedented opportunities: they give investors a chance to minimize their risks by taking into account where governments around the world are aiming for, to embed their investments within a historically legitimated framework, and to identify and promote the globally relevant economic branches of the future. Likewise, businesses can and must examine their societal impact not just in general but within the important context of a country’s SDG performance. For these purposes, the new SDG Index and Dashboards Report 2018, published this week, shows how implementation of the SDGs is progressing around the world; the SDG Index can offer guidance regarding capital allocation, as well as business impact in the countries that are affected by a company’s operations.
Following an opening address given by Pope Francis at the historic summit in 2015, the state and government heads of the 193 UN member states forged ambitious plans for the future: the 2030 Agenda with its 17 Sustainable Development Goals (SDGs). They range from ending extreme poverty to ensuring sustainable production patterns to fostering global cooperation. While the summit’s closing document was signed by politicians, the governments they represent will never be able to achieve the goals on their own. Investors and the private sector will play a key role in whether we meet the challenge or not. Just look at the numbers. The financing requirements not yet covered are estimated at anywhere between $1.4 trillion and $2.5 trillion. The sector-specific financing requirements for Goal 6 alone (“Ensure availability and sustainable management of water and sanitation for all”), for example, were estimated by the World Bank at €28.4 billion a year.
Considering their current tax revenues, public authorities are still totally out of their depth with such figures. Greater budget resources (especially in developing and emerging countries) and increased official development assistance on the part of the rich countries need to be mobilized up to the goal of 0.7%, which only a handful of countries have met so far. But even then, additional capital remains indispensable to implement the Agenda 2030.
Governments around the world are already basing their policies on the SDGs – and this is something that will affect both companies and investors more and more. Hence, investors should gear themselves up in good time and see the SDGs as an opportunity – for themselves to improve sovereign risk assessment and also for society as a dual bottom line. It should therefore be part and parcel of an investor’s professionalism and fiduciary duty to minimize such risk and to increasingly take into account the SDGs. Capital should go in particular to where it is most urgently needed in order to realize the SDGs, while being invested in a promising way at the same time.
Likewise, businesses should not only assess the societal impact in the countries in which they operate (which, thankfully, many are doing). More importantly, they should relate their activities to the state of SDG progress and the specific challenges these countries are facing. Are they making matters worse with regard to the goals that are a nation’s weak points already? Or are they actively contributing to improvements in areas that desperately need attention? Only if businesses see the supply as well as the demand side in terms of the SDGs can they successfully recalibrate their activities accordingly.
This does, however, raise some core questions. How are the individual countries getting on with realizing the SDGs? What are the countries’ primary challenges, and where is there the greatest room for improvement? And what are good examples of the 17 goals being realized, offering good prospects of success that can be built upon and which other countries can learn from?
Together with my colleagues, I developed the SDG Index precisely to answer such questions, and our instrument is being continuously developed under the leadership of Professor Jeffrey Sachs, world-renowned economist and UN Special Adviser for the SDGs. This instrument measures the performance of all 193 countries regarding the SDGs, examining up to around 100 indicators per country in the process. We reviewed all the data available around the world relating to the goals, and performed a consultation involving the more than 500 research institutes within the Sustainable Development Solutions Network, which was created under the auspices of the UN secretary-general.
Beyond the obvious use of our instrument for governments and civil society to see if countries are on track, the data offers investors and businesses important guidance regarding investments and operations in their countries. Thanks to in-depth consultation with the scientific communities of all the 17 SDGs, we identified threshold values for the indicators and expressed these using a traffic light system. This allows us to visualize the countries’ SDG performances at a glance in an SDG Dashboard, as well as to calculate trends for the coming years based on current and past performance (see figure).
Figure: SDG Performance of the United States (SDG Index Report 2018, www.sdgindex.org)
An opportunity for investors and businesses
This information can show investors the SDGs for which there is the greatest need for financing, country by country. The SDG Index can provide guidance to assess government bonds and for direct investments in a company which specifically works toward improving a country’s SDG weak points.
The SDG Index Report also highlights best practices from among the countries’ SDG performances that are worth transferring to other countries. Investors should support this kind of peer group learning with their investments because the SDGs not only track future topics that are likely to become increasingly important between now and 2030 – they also track the underlying future industries that offer potentially high returns.
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Investors can use the SDG Dashboards with up to 100 indicators per country for the benchmarking of both positive and negative criteria. Exclusion criteria can be applied, such as corruption ratings, inequality and a country’s environmental performance indicators, while a best-in-class approach is equally possible.
Many investors (in particular impact investors) have already recognized the benefits and the value of the SDGs. The SDGs give them an unprecedented framework with which to structure and, if necessary, modify their portfolios. The Dutch pension fund PGGM, for example, identified six SDG focal goals in which to invest. The laudable new platform Align17 additionally offers private investors access to deal flow and precise guidance in order to tie their investments with the 17 SDGs. This initiative that emerged from the World Economic Forum’s Young Global Leaders program already has the support of renowned partners like UBS, Linklaters, PWC, and the Sorenson Impact Center.
Investors and businesses can – and must – help with this mission, as was stressed by government heads in the UN resolution on the SDGs: “We are the first generation that can end poverty, and the last one that can take steps to avoid the worst impacts of climate change.” A sentence with a great deal of pathos, but a great deal of truth to it, too.
The SDG Index Report 2018 is now available on www.sdgindex.org. A launch event will take place in New York during the UN High-level Political Forum upon the invitation of the German UN Ambassador on 17 July 2018.
The views expressed in this article reflect those of the author and not necessarily the institutions he is affiliated with.