hongkongen
The road ahead for the SDGs

The road ahead for the SDGs

10-12-2020 | Yearly outlook

The Sustainable Development Goals (SDGs) have been taking sustainable investing to the next level. Since their adoption by all United Nations member states in 2015, the 17 SDGs, with their 169 targets and 232 indicators, have crystallized an understanding of sustainable development. Together they provide a blueprint for investors seeking to harvest alpha while contributing to societal well-being and environmental sustainability. Looking ahead, how can we expect the SDGs to further shape the sustainable investing market?

  • Jan Anton van Zanten
    Jan Anton
    van Zanten
    SDG Strategist

The SDGs will see increased momentum as the world seeks to recover from Covid-19

To date, there has been some progress on the SDGs.1 Today, 25% on average of parliamentarians are women, up from 19% in 2010. The share of the population using safely managed drinking water grew from 61% in 2017to 71% in 2000. And as of 2019, 17% of oceans are protected, a doubling since 2011.

Yet the world is not on track to achieve the SDGs. We are losing biodiversity at an alarming rate, inequality within and between countries is widening, and climate change is affecting more people every day.2 Moreover, the Covid-19 pandemic is not only an unprecedented health challenge: the ensuing economic crisis is expected to push 400 million people into poverty3 and cause food shortages affecting 265 million people.4 And as the virus affects people living in poverty and those with underlying health conditions in particular, Covid-19 is exacerbating inequality.5

Faced with this bleak outlook, scientists and policymakers have started to debate whether the SDGs should be revised. A recent article in Nature, a leading scientific journal, suggested that in a pandemic, countries would do well to focus on a few strategic goals rather than all 17 SDGs.6 The journal’s editors followed up by arguing that the SDGs should be revised to make them more achievable.7 However, others quickly responded that “great feats are rarely a product of lowered ambition” and that Covid-19 only reinforces why the goals were established in the first place: “to chart a better course towards common economic, social and environmental ambitions that will guarantee humanity’s long-term future”.8

Indeed, despite that bleak outlook, there is good reason to add momentum to achieving the SDGs. They present a valuable approach to managing Covid-19 while simultaneously helping us navigate towards more sustainable societies.9 The SDGs unite all governments, but also businesses, academics, and NGOs, in a shared agenda with common goals – which is precisely what is needed in times of crisis. Moreover, achieving the SDGs will create a more stable world in which the likelihood of future crises will be lowered, and the ability of societies to cope with hazards will be strengthened.

It is not surprising that the United Nations itself asserts that the SDGs are “vital for a [Covid-19] recovery that leads to greener, more inclusive economies, and stronger, more resilient societies”. Hence, rather than revising the goals, there is an urgent need to double down on them.

Consequently, in 2021 we expect the investment community to increasingly engage with the SDGs. Two forces – scaling earlier investments and aligning with public policy – will drive this trend, while one consequence – the need for impact measurement – will become more urgent.

This article is one of the special topics in our 2021 Outlook ‘Tackling the trilemma’
This article is one of the special topics in our 2021 Outlook ‘Tackling the trilemma’
Read more

Scaling SDG investing solutions

The past years witnessed various asset owners, managers, and data providers develop solutions for taking action on the SDGs. This shows that the SDGs are gaining traction within the investment community.

For instance, the UN Principles for Responsible Investment, a global initiative that aims to create a “more sustainable global financial system”, is calling on its more than 3,000 subscribers with USD 103.4 trillion in AuM to advance the SDGs. To help them do so, it has developed a five-part framework that enables investors to improve the outcomes of their investment decisions on the SDGs.10 

Another example involves APG, AustralianSuper, British Columbia Investment Management Corporation (BCI) and PGGM, which have joined forces to develop a platform for investing in solutions that contribute to the SDGs. Their Sustainable Development Investments (SDI) Asset Owner Platform was launched in July 2020. In turn, we at Robeco have created a proprietary three-step framework for assessing how companies impact the SDGs, which serves as a backbone to our SDG Credits and SDG Equity strategies. And data providers such as MSCI and S&P have recently started to distribute SDG-related data.

Now the groundwork has been done, it is time to scale the created solutions. As the fruits of this earlier labor are being picked, we will undoubtedly see more investments into companies helping to attain the global goals.

Riding the waves of regulation and public investment

Various governments are in the midst of launching ambitious regulations governing sustainable investing. At the same time, many governments are using public investments to dampen the socio-economic blows of Covid-19 and simultaneously advance sustainable development. Both can catalyze investor action for the SDGs.

First, the European Commission (EC) is spearheading the regulation of sustainable investing by launching its “EU Taxonomy” and the “Sustainable Finance Disclosure Regulation”. The taxonomy establishes detailed performance thresholds that measure whether companies (i) substantially contribute to one of six environmental objectives11; (ii) do no significant harm to the other environmental objectives; and (iii) comply with minimum social safeguards. The EC brands its taxonomy as: “one of the most significant developments in sustainable finance” that “will have wide ranging implications for investors and issuers working in the EU, and beyond.”12 It is also launching its SFDR, which requires investors to report on standardized sustainability indicators. The aims are to provide more transparency on sustainability by promoting comparability and preventing greenwashing.

Both types of regulations will come into force in 2021 and will set a high bar for sustainable investing. If investors rise to the challenge, significantly more capital will be allocated to truly innovative companies, leading the transition towards achieving the SDGs. This might mean channeling funds from existing ‘mainstream’ ESG funds to stricter ‘dedicated’ SDG or climate strategies. And while Europe is taking the lead, there are signs that other countries are following. Japan, Canada, and Malaysia appear to be developing their own taxonomies13, while rumors are surfacing that China and Europe might form a taskforce on their sustainable finance taxonomies.14

Secondly, various countries are using their investment programs meant to dampen the socioeconomic blows of the pandemic as an opportunity for sustainability. For instance, the EC’s EUR 1.85 trillion recovery instrument links to the European Green Deal – the continent’s growth strategy that strives to make the EU climate-neutral by 2050 – and looks to invest in sustainable, future-oriented activities that link to the SDGs. Priority sectors for such public investments include food production and biodiversity, mobility, energy, and buildings. 

On introducing the EU recovery instrument, EC President Ursula von der Leyen said: “The recovery plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalization will boost jobs and growth, the resilience of our societies and the health of our environment. This is Europe’s moment.”. And with the election of Joe Biden as incoming president, the United States is also expected to make public investments in sustainable solutions.

Although it remains to be seen to what extent such investments truly benefit sustainability – governments also appear to still be spending vast sums bailing out ‘dirty’ industries such as airlines in this pandemic – it is clear that recovery instruments will help advance the SDGs. Such public investments will support the business models of companies providing solutions for the goals, presenting real opportunities for investors.

The proof is in the pudding: The shift towards impact measurement

As the SDGs continue to gain influence in the investment community, investors using the SDGs will increasingly need to prove what the impact of these strategies is.

Investors that use the SDGs in their investment process tend to promise to deliver financial results alongside supporting real world impact: contributions to the development of societies or to environmental objectives. The logic is that, because the SDGs delineate the intended development pathways of all countries around the world, companies that help achieve the SDGs are likely to be the future winners while companies that erode progress are likely to lose. Aligning investments with the ambitions of the goals then is a good way to deliver financial returns. It also ensures that money flows towards companies providing solutions to the challenges the world faces. Measuring what the societal and environmental impact is of companies helps fulfill both promises.

Impact measurement allows us to select companies that are best aligned with the SDGs – and thus expected to be future winners. It also enables us to select companies that generate the biggest impacts at the lowest costs. And, importantly, it helps investors explain to clients how their money is invested in companies that improve the lives of people and enhance the sustainability of our planet.

Outlook

Overall, 2021 will be an important year for sustainable investing. The SDGs help societies navigate through and beyond the Covid-19 pandemic. They also serve as a blueprint for sustainable investing strategies. Investors will expand on their earlier investments in the SDGs to integrate these goals into their strategies, and they will increasingly align with public policies for sustainable development. They will thereby stand to not only create wealth, but also real world impact.

1 E.g. UN (2019; 2020).
2 E.g. Sachs et al. (2019; 2020); UN (2019).
3 Sumner et al. (2020).
4 FAO & WFP (2020).
5 Ahmed et al. (2020).
6 Nature (2020).
7 Naidoo et al. (2020).
8 Bhattacharya et al. (2020)
9 Van Zanten & Van Tulder (2020)
10 https://www.unpri.org/sustainable-development-goals/investing-with-sdg-outcomes-a-five-part-framework/5895.article
11 The six environmental objectives are: (1) Climate change mitigation; (2) Climate change adaptation; (3) Sustainable and protection of water and marine resources; (4) Transition to a circular economy; (5) Pollution prevention and control; (6) Protection and restoration of biodiversity and ecosystems.
12 EC (2020).
13https://corpgov.law.harvard.edu/2020/06/10/the-ripple-effect-of-eu-taxonomy-for-sustainable-investments-in-u-s-financial-sector/
14https://www.responsible-investor.com/articles/china-and-eu-to-form-taskforce-on-green-taxonomies
15 Combining the EUR 750 billion recovery fund and reinforcements from the EU’s long-term 2021–2027 budget.
16 EC (2020b).

Important information

The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong.
This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing
This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions.
The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.
Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.

Subjects related to this article are:
Logo

Disclaimers

1. General
Please read this information carefully.

This website is prepared and issued by Robeco Hong Kong Limited ("Robeco"), which is a corporation licensed by the Securities and Futures Commission in Hong Kong to engage in Type 1 (dealing in securities); Type 4 (advising in securities) and Type 9 (asset management) regulated activities. The Company does not hold client assets and is subject to the licensing condition that it shall seek the SFC’s prior approval before extending services at retail level. This website has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.

2. Important risk disclosures
2. Important risk disclosures Robeco Capital Growth Funds (“the Funds”) are distinguished by their respective specific investment policies or any other specific features. Please read carefully for the risks of the Funds:

  • Some Funds are subject to investment, market, equities, liquidity, counterparty, securities lending and foreign currency risk and risk associated with investments in small and/or mid-capped companies.
  • Some Funds are subject to the risks of investing in emerging markets which include political, economic, legal, regulatory, market, settlement, execution, counterparty and currency risks.
  • Some Funds may invest in China A shares directly through the Qualified Foreign Institutional Investor (“QFII”) scheme and / or RMB Qualified Foreign Institutional Investor (“RQFII”) scheme and / or Stock Connect programmes which may entail additional clearing and settlement, regulatory, operational, counterparty and liquidity risk.
  • For distributing share classes, some Funds may pay out dividend distributions out of capital. Where distributions are paid out of capital, this amounts to a return or withdrawal of part of your original investment or capital gains attributable to that and may result in an immediate decrease in the net asset value of shares.
  • Some Funds’ investments maybe concentrated in one region / one country / one sector / around one theme and therefore the value of the Fund may be more volatile and may be subject to concentration risk.
  • The risk exists that the quantitative techniques used by some Funds may not work and the Funds’ value may be adversely affected.
  • In addition to investment, market, liquidity, counterparty, securities lending, (reverse) repurchase agreements and foreign currency risk, some Funds are subject to risk associated with fixed income investments like credit risk, interest rate risk, convertible bonds risk, ABS risk and the risk of investments in non-investment grade or unrated securities and the risk of investments made in non-investment grade sovereign securities.
  • Some Funds can use derivatives extensively. Robeco Global Consumer Trends Equities can use derivatives for hedging and efficient portfolio management. Derivatives exposure may involve higher counterparty, liquidity and valuation risks. In adverse situations, the Funds may suffer significant losses (even a total loss of the Funds’ assets) from its derivative usage.
  • Robeco European High Yield Bonds is subject to Eurozone risk.
  • Investors may suffer substantial losses of their investments in the Funds. Investor should not invest in the Funds solely based on the information provided in this document and should read the offering documents (including potential risks involved) for details.

3. Local legal and sales restrictions
The Website is to be accessed by “professional investors” only (as defined in the Securities and Futures Ordinance (Cap.571) and/or the Securities and Futures (Professional Investors) Rules (Cap.571D) under the laws of Hong Kong). The Website is not directed at any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the publication or availability of the Website is prohibited. Persons in respect of whom such prohibitions apply or persons other than those specified above must not access this Website. Persons accessing the Website need to be aware that they are responsible themselves for the compliance with all local rules and regulations. By accessing this Website and any of its pages, you acknowledge your agreement with understanding of the following terms of use and legal information. If you do not agree to the terms and conditions below, do not access this Website or any pages thereof.

The information contained in the Website is being provided for information purposes.

Neither information nor any opinion expressed on the Website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. The information contained in the Website does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, most recent annual and semi-annual reports, which can be all be obtained free of charge at www.robeco.com/hk/en and at the Robeco Hong Kong office.

4. Use of the Website
The information is based on certain assumptions, information and conditions applicable at a certain time and may be subject to change at any time without notice. Robeco aims to provide accurate, complete and up-to-date information, obtained from sources of information believed to be reliable. Persons accessing the Website are responsible for their choice and use of the information.

5. Investment performance
No assurance can be given that the investment objective of any investment products will be achieved. No representation or promise as to the performance of any investment products or the return on an investment is made. The value of your investments may fluctuate. The value of the assets of Robeco investment products may also fluctuate as a result of the investment policy and/or the developments on the financial markets. Results obtained in the past are no guarantee for the future. Past performance, projection, or forecast included in this Website should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Fund performance figures are based on the month-end trading prices and are calculated on a total return basis with dividends reinvested. Return figures versus the benchmark show the investment management result before management and/or performance fees; the fund returns are with dividends reinvested and based on net asset values with prices and exchange rates of the valuation moment of the benchmark.
Investments involve risks. Past performance is not a guide to future performance. Potential investors should read the terms and conditions contained in the relevant offering documents and in particular the investment policies and the risk factors before any investment decision is made. Investors should ensure they fully understand the risks associated with the fund and should also consider their own investment objective and risk tolerance level. Investors are reminded that the value and income (if any) from shares of the fund may be volatile and could change substantially within a short period of time, and investors may not get back the amount they have invested in the fund. If in doubt, please seek independent financial and professional advice.

6. Third party websites
This website includes material from third parties or links to websites maintained by third parties some of which is supplied by companies that are not affiliated to Robeco. Following links to any other off-site pages or websites of third parties shall be at the own risk of the person following such link. Robeco has not reviewed any of the websites linked to or referred to by the Website and does not endorse or accept any responsibility for their content nor the products, services or other items offered through them. Robeco shall have no liability for any losses or damages arising from the use of or reliance on the information contained on websites of third parties, including, without limitation, any loss of profit or any other direct or indirect damage. Third party off-site pages or websites are provided for informational purposes only.

7. Limitation of liability
Robeco as well as (possible) other suppliers of information to the Website accept no responsibility for the contents of the Website or the information or recommendations contained herein, which moreover may be changed without notice.
Robeco assumes no responsibility for ensuring, and makes no warranty, that the functioning of the Website will be uninterrupted or error-free. Robeco assumes no responsibility for the consequences of e-mail messages regarding a Robeco (transaction) service, which either cannot be received or sent, are damaged, received or sent incorrectly, or not received or sent on time.
Neither will Robeco be liable for any loss or damage that may result from access to and use of the Website.

8. Intellectual property
All copyrights, patents, intellectual and other property, and licenses regarding the information on the Website are held and obtained by Robeco. These rights will not be passed to persons accessing this information.

9. Privacy
Robeco guarantees that the data of persons accessing the Website will be treated confidentially in accordance with prevailing data protection regulations. Such data will not be made available to third parties without the approval of the persons accessing the Website, unless Robeco is legally obliged to do so. Please find more details in our Privacy and Cookie Policy.

10. Applicable law
The Website shall be governed by and construed in accordance with the laws of Hong Kong. All disputes arising out of or in connection with the Website shall be submitted to the exclusive jurisdiction of the courts of Hong Kong. 

Please click the “I agree” button if you have read and understood this page and agree to the Disclaimers above and the collection and use of your personal data by Robeco, for the purposes for which such data is collected and used as set out in the Privacy and Cookie Policy, including for the purpose of direct marketing of Robeco products or services. Otherwise, please click “I Disagree” to leave the website.

I Disagree