What are the “UN Sustainable Development Goals”?
The Sustainable Development Goals (SDGs) is a framework of 17 goals developed by the United Nations and aimed at achieving a better and more sustainable future for all. The goals were initially set up in 2015 and the general intention is for them to be achieved by 2030.
There are specific targets for each goal, which are outlined in the UN Resolution adopted by the General Assembly in 2017, along with specific measures that can be used to monitor the progress towards achieving the targets.
Key Learning Points
- The Sustainable Development Goals (SDGs) are a set of 17 goals that have been designed to achieve a better and more sustainable future;
- The SDGs were introduced in 2015 by the United Nations as a successor to the Millennium Development Goals, and aim to be achieved by 2030;
- A UN Resolution adopted by the General Assembly in 2017, made the goals more actionable by introducing specific targets and indicators to measure the progress towards achieving each goal; and
- With increased support from governments, regulators and international organisations, investors are endorsed to increase the positive outcomes and decrease the negative outcomes arising from their decisions.
How SDGs Investing Works?
Despite the increased focus on sustainable and responsible investing, there is no universal approach to SDGs investing. While the main goal of this approach remains to increase the positive outcomes of investment decisions and decrease the negative ones, investment managers tend to adopt various practices to ESG (Environmental, Social and Governance) investing, for example, active ownership, making a positive impact or exclusion screening.
The vast majority of ESG-focused funds for example, closely monitor and report their contribution towards achieving each SDG individually. In addition, the most recent developments in the financial sector, which were accelerated by the COVID-19 pandemic, reveal that there is an increased focus by investment companies to align their business and contribute towards the philosophy of the UN SDGs.
The Principles for Responsible Investment (PRI)
The PRI is a broad network of investors, with combined assets under management of over $103tn (as of 31/03/2020), that is supported by the United Nations and plays a significant role towards achieving the SDGs. It has over 4,000 signatories (companies) that include ESG issues in their investment analysis and assesses the outcomes of investment decisions to the environment and society at a higher level. This in practice allows these investment managers to identify opportunities that are more aligned with the SDGs and pose a lower level of material risk to their portfolios. Typically, companies that adopt sustainable and responsible practices are expected to outperform over the long term due to stronger management and higher business efficiency.
As one of the sectors that drive this initiative, investors should not only allocate new capital towards achieving the SDGs but also be responsible for redirecting the existing funds and be active stewards of the companies they are invested in. However, even considering the increasingly popular approaches of ESG integration may have a positive impact aligned with the SDGs, currently, they do not get as far as needed.