The Essentials of SDGs

The United Nations’ Sustainable Development Goals are taking sustainable investing to the next level, focusing on clearly defined objectives to transform our world, while also offering returns for investors.

Learning objectives

• How the 17 SDGs came into being as the successor to MDGs

• The methods for tracking their progress, and their limitations

• The funding needed to achieve them after Covid hurt progress
  

Why then should investors place their clients’ cash into an arena that essentially targets social or development projects, rather than more established means of generating returns?

Learning objectives

• Why the SDGs present a great business opportunity for companies

• The most (and least) favored SDGs for investment strategies

• How the climate survey shows growing interest in climate change goals
  
  

The use of environmental, social and governance (ESG) factors is a standard part of the research process for sustainable investing. Investing in the SDGs is a form of impact-aligned investing that complements ESG-based investing – but the two things are not the same.

Learning objectives

• ESG ratings seek to assess risk while SDG investing looks for an impact

• Companies can get a positive ESG but negative SDG score, or vice-versa

• How the two often don’t correlate, as shown by the EU Taxonomy and DNSH
  
  

We have seen that the SDGs present a great investment opportunity, but it is important to know which companies are able to contribute to these goals before deciding whether to invest in them.

Learning objectives

• Calculating positive and negative contributions to one or more goals

• SDG Framework scores companies from -3 through zero to +3

• SDI Asset Owner Platform assesses impacts using metrics for sub-goals
  

We’ve seen how the contributions that companies make to the SDGs can be assessed – but what about countries? Integrating the goals into government bond portfolios can follow a similar logic as for equities or credits, but requires a totally different assessment.

Learning objectives

• Countries issue bonds to pay for public projects that could be SDG-targeted

• Three-step process attributes scores based on potential to further the goals

• Weighting system used to create SDG Core and Focus hypothetical portfolios

Once an investor has decided to take the plunge and support the SDGs, a choice of investment vehicle needs to be made, using equities, bonds, or other forms of funding.

Learning objectives

• Investing in the SDGs using bespoke equity and bond strategies

• Using thematic strategies such as targeting renewable energy

• Engagement as a means of progressing the goals indirectly
  

So, with all this investment, how are the SDGs actually doing? Unfortunately, the goals are not progressing as well as was hoped – partly due to Covid – but we’re still making an impact in many areas, including data quality for measurement.

Learning objectives

• The poor progress on many SDGs, according to the UN half-time report

• Best results seen in responsible production and consumption

• Strong progress on data measurement and clarity of conception
  

We can see how investing in the SDGs can make an impact, though different investors have differing motivations for what they hope to achieve with their money.

Learning objectives

• Money flowing into sustainable development through global AAA bonds

• Corporate cases showing how products and services can benefit SDGs

• SDG Credits success stories in renewable energy and banking
  

To summarize, let us recap what we know about the Sustainable Development Goals and investing in them. This final chapter highlights the main points from the previous eight.