Why SDGs matter in a changing investment world

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  • 5 min
  • December 15, 2020

Beware of trivialising or paying lip service to critically important global sustainable development goals (SDGs), warns Newton head of sustainable investment Andrew Parry.

In a year of extremes, dominated by the Covid-19 pandemic, one small but significant milestone was achieved in 2020 in the ongoing efforts to eliminate global poverty, tackle climate change and create a better planet for all.

September marked the fifth anniversary of the SDGs – the UN’s 17 interlinked goals designed to be a blueprint to achieve a better and more sustainable future for all. The 17 goals are a global framework to help deliver an inclusive, just and sustainable society by 2030.

The fifth anniversary of the goals marks a chance to take stock on progress so far.

While the UN estimates the successful delivery of the SDGs could ultimately add US$12 trillion to the global economy, alongside 380 million new jobs¹, Newton head of sustainable investment Andrew Parry points out progress is, in many cases, running well behind target.

Off target?

The latest report from the World Business Council for Sustainable Development reveals that while 84% of member companies referenced specific goals in their sustainability reports, only 15% had aligned their business strategy to specific target-level SDG criteria,” he says.

Despite the near ubiquitous presence of the SDGs in the latest investment and corporate reports, the flow of capital and tangible action needed to deliver on them is behind target, with an estimated US$5 to 7 trillion of annual expenditure needed if pledges are to be fulfilled.”

Beyond this, Parry is concerned some investors and companies may be latching on to the concept of the SDGs and their terminologies, losing sight of their original aims and the way they were designed to be applied. This he fears, risks reshaping SDGs as a fashionable badge, one some investment firms might use to burnish their responsible investment credentials via so-called ‘SDG-washing’ or other means.

We need to be mindful of the fact SDGs were originally designed for governments and not to be a financial tool or to conveniently map existing corporate activity. The goals are about something we want to achieve in the future and, in my view, we shouldn’t trivialise them by trying to force them into a financial framework,” he adds.

The most important word in the SDGs is goals, something we aspire to achieve in the future and they set out a journey we can take to genuinely deliver a sustainable future. The SDGs represent an incredibly ambitious set of opportunities and could provide us with great insights into emerging growth for the future. Key is that they reinforce the concept that sustainability is a journey to a better place, not a current state of being.”

Climate concerns

Some of the key ambitions of the SDGs focus on efforts to tackle global warming and goal 13 of the SDGs specifically centres on climate change. Parry has watched the recent rise in extreme weather-related events with mounting concern but he hopes international cooperation, and a focus on goals such as the SDGs, can effect real change and have a meaningful impact in tackling global extreme weather events and their underlying causes.

Announcements on zero carbon by countries such as China, Korea and Japan, new climate emission reduction plans by Russia and the election of an environmentally conscious US president in the Democratic Party’s Joe Biden are just some positive signs that give hope the SDGs can be progressed, he adds.

Parry acknowledges the Covid-19 pandemic has had a huge impact on society and has shifted some immediate focus away from SDGs to economic recovery. However, as the world emerges from the pandemic crisis, he expects attention will be paid to its impacts and efforts to fulfil the goals will be renewed.

Underlining the long-term importance of both the SDGs and markets they are designed to support, Parry adds: “The size of the investable market the SDGs reach is huge. They touch on virtually every sector, economy and country in the world where companies can have a complex series of positive, and importantly negative impacts on society and the environment.

We need to look at the thinking behind the SDGs more deeply and try to understand how we can transition on this journey to a more sustainable future which could, in turn, also present some great growth opportunities for companies and investors.Governments also need to accelerate and change strategy because there has been too much complacency on future risks when the real risks are here and now and we actually need genuine action today,” he concludes.

¹ PwC. Delivering the Sustainable Development Goals. 2017.

Important information:

https://www.bnymellonim.com/outlook/global-disclosure/

GE200928 EXP 10 JUNE 2021

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