Financing the Sustainable Development Goals: Impact investing in action
In 2015, the international community adopted an ambitious global development plan aimed at eliminating poverty, reducing inequality, protecting the environment, tackling climate change, and ensuring prosperity, education and access to healthcare for all.
Commonly referred to as the Sustainable Development Goals (SDGs), these 17 goals were created by the United Nations General Assembly as a global call to action for positive change.
Achieving the SDGs is one of the major development aspirations of emerging economies. But the challenges for mobilising financial resources for sustainable development are enormous. According to the United Trade Conference on Trade and Development (UNCTAD), an estimated $5-7 trillion is needed annually to achieve the SDGs.
While Official Development Assistance (ODA) remains essential to the progress and growth of many emerging economies, ODA alone is not sufficient to meet the SDG financing deficit. It’s clear that delivering resources and deploying capital at the level and scale needed to achieve the SDGs requires decisive action from a broad range of stakeholders.
In fact, when the United Nations (UN) conceptualised the SDGs, they did so with the acknowledgement that it would be impossible to achieve these goals without private investment.
This suggests a significant change in global thinking and rationale. In the past, the UN has concentrated its efforts on the governments of its member nations and affiliated nonprofits. But during the design and drafting of these goals, the UN recognised the colossal untapped potential of the world’s investment community to influence positive global change.
In addition, capital markets have long been driven by the imperative of prioritising financial returns and maximising profits. But this zero-sum game has created the global environment we find ourselves in today. Extreme inequality and unemployment. Global warming. And inadequate access to healthcare, sanitation and education.
However, there is an increasing drive towards investment strategies that generate measurable socio- economic benefits alongside financial returns. The SDGs also present a massive opportunity for impact investors to support this global agenda by deploying increasing amounts of capital to high-impact projects in some of the world’s poorest countries to address these critical societal challenges.
Four years on from the inception of the SDGs, impact investors now manage approximately $228 billion in assets according to the Global Impact Investment Network, and are playing an increasingly important role in providing capital and resources to help emerging economies achieve the SDGs.
In fact, globally $23 trillion is now allocated to funds dedicated to socially responsible investing. According to the Global Sustainable Investment Alliance, this has grown over 25 percent since 2014. In addition, the global green bond market was estimated to be around $250-300 billion in 2018, up from $155 billion in 2017.
Financial decision-makers are increasingly realising that issues such as inequality and climate change pose tremendous risks to short, medium and long-term sustainability, and they have identified the role that they can play in creating solutions that effect positive outcomes for the communities into which they invest. The industry is clearly at an exciting inflection point with many people and organisations looking to become involved.
By incorporating the goals into fund raising, product development, and throughout the investment cycle, impact investors are making meaningful contributions towards the achievement of these goals by 2030.
Although emerging economies face enormous obstacles we must recognise that world has the resources to uplift and empower all of its people. If we can mobilise and motivate enough people, organise resources effectively and direct them strategically, it is possible to shift the fortunes of emerging economies and achieve the goals outlined by the UN by 2030.