Investors ramp up investments in the SDGs

The second annual survey of 300 financial investors showed rising adoption of the full range of 17 goals over the next two years, as they are used to target specific investment objectives such as climate change or empowerment.

Some 18% of investors said they had made it a high priority to align or benchmarking their portfolios with the SDGs, while 22% indicated they were doing this, but as a lower priority. A further 40% said they would consider doing so over the next two to three years.

And as has been commonly found in SDG investing, some of the goals are more popular to target than others, with a core focus on the favorite objective of tackling climate change itself (SDGs 7 and 13), but surprisingly with less interest in the related issue of natural capital (SDGs 12, 14 and 15).

“The SDGs provide a blueprint for sustainable investors, and this survey shows that many investors are using the goals for exactly that purpose,” says Jan Anton van Zanten, Robeco’s SDG Strategist. “In most cases, investors indicate that they are trying to align their investments with these goals, now and in the future, though with differing objectives.”

“It’s encouraging news because integrating these global goals into investing strategies can be a daunting task. How do you know which goals are positively or negatively impacted by the companies you might invest in? This requires research to identify the companies that can really make a difference – and of course, this is where we come in.”

“Robeco’s SDG Framework provides a thorough assessment of companies’ impacts on the SDGs and  enables us to align our investments with positive impacts, on the entire SDG agenda, or on specific goals if required. That way, we pursue financial returns and support companies that contribute to a better planet for all.”

The 17 goals were divided into five buckets for the survey – climate change, governance, basic needs, empowerment and natural capital – so that the following question could be answered:

“Which of the following UN SDGs do you see as relevant to your overall investment approach today, and which do you expect to be relevant to it in the next 2 years?”

The survey showed that 63% of investors are focused on climate change investing today, while 55% will make it a priority over the next two years. Investments will target strategies that can contribute to two of the goals: SDG 7 (affordable and clean energy) and SDG 13 (climate action).

There was a surprisingly high commitment to support governance, with 50% of investors saying they are targeting it now and 46% committing to it over the next two years. These target two SDGs that are normally less popular as they are seen as more difficult to invest in: SDG 16 (peace, justice and strong institutions) and SDG 17 (partnerships to achieve the goals).

For the basic needs bracket targeting some of the most pressing issues for society such as poverty and poor health, almost half (46%) said they are investing in the relevant goals now, rising to 51% who will do so over the next two years. These target SDG 1 (no poverty), SDG 2 (zero hunger), SDG 3 (good health and well-being), SDG 6 (clean water and sanitation) and SDG 11 (sustainable cities and communities).

Empowerment similarly follows the more holistic societal issues such as reducing inequality. These cover SDG 4 (quality education), SDG 5 (gender equality), SDG 8 (decent work and economic growth), SDG 9 (industry, innovation and infrastructure) and SDG 10 (reduced inequalities). The survey showed that 40% will target the five relevant SDGs now and 52% over the next two years.

The biggest shift was seen in natural capital, where only 24% of investors are targeting it now, but 53% are planning to do so over the next two years. These target SDG 12 (responsible consumption and production), SDG 14 (life below water), SDG 15 (life on land) where experience has shown it can be difficult to find suitable listed companies to invest in.

Regionally, there are differences in preferences between investors located in Europe, North America and Asia. Climate change is the most focused category of investors across all regions, though Europe gives this a higher priority (76% today) than Asia (57%) and North America (54%).

North America has the highest interest today in governance (55%) but very little interest in natural capital, with only 14% of investors saying they are prioritizing it today. Asia is most interested in climate change (57% today) and least interested in natural capital (24%).

Perhaps surprisingly, as Europe is the home of many governance institutions including the European Court of Human Rights, the region lags behind Asia and North America in investor interest in this bucket. Only 47% of European investors have it as a priority today compared with 49% in Asia and 55% in North America.

The results are contained in the 2022 Robeco Climate Survey, which gathered the views of 300 global investors on their approaches to decarbonization, climate change, biodiversity and engagement. It is the second survey of its kind following the success of the 2021 report.

The research was carried out via an extensive global online survey conducted by CoreData Research during January 2022. Collectively the investors questioned have assets under management of USD 23.7 trillion, ranging from under USD 1 billion for the smallest to over USD 1 trillion for the largest.