latamen
Sustainable Development Goals: an opportunity for investors

Sustainable Development Goals: an opportunity for investors

11-10-2016 | Insight

The UN has released the Sustainable Development Goals, asking the private sector to contribute as well. Asset managers such as Robeco cannot only make an important contribution, they can also benefit from the investment opportunities that arise.

  • Peter van der Werf
    Peter
    van der Werf
    Engagement Specialist
  • Guido Moret
    Guido
    Moret
    Head of Sustainability Integration Credits

Speed read

  • The UN has released the Sustainable Development Goals (SDG)
  • They have called on the private sector to actively back the SDGs
  • Asset managers can contribute through ESG integration and active ownership

In the autumn of 2015, the Sustainable Development Goals (SDGs) were released by the United Nations as a successor to the Millennium Developing Goals (MDGs), which expired in 2015 and had achieved good results on improving education levels and health, reducing hunger and alleviating poverty. The ‘Agenda for Sustainable Development’ has been adopted by 193 countries, who together agreed to contribute to the realization of 17 SDGs by 2030. The 17 goals range from ensuring the availability of water and sanitation for all, food security, achieving gender equality, to access to affordable and sustainable energy within 15 years.

Figure  1  |  The UN Sustainable Development Goals

Stay informed on our latest insights with monthly mail updates
Stay informed on our latest insights with monthly mail updates
Subscribe

Source: http://www.globalgoals.org

An appeal to the private sector

The SDGs differ from the MDGs in that they call on the public AND the private sector to cooperate with the signatory governments to tackle the most serious issues facing both people and planet.

According to UNCTAD the SDGs will require a step-change in the levels of both public and private investment in all countries. UNCTAD has estimated a yearly financial gap of USD 2.5 trillion in SDG investments. This means that governments themselves cannot financially achieve the SDGs on their own.

The private sector can back many SDGs directly, especially in relation to infrastructure, by investing in power generation, renewable energy, transport, water and sanitation projects. It can also contribute to more abstract concepts such as sustainable economic growth and sustainable production and consumption. Other SDGs such as climate change adaptation, education and the promotion of peaceful societies are more systemic in nature, and thus more difficult to operationalize for the private sector. Therefore we expect that these goals will be mainly addressed by the public sector.

According to a recent PwC study, SDGs 8 (Decent work and economic growth), 13 (Climate action) and 9 (Innovation and infrastructure) have been estimated to be the most actionable and practicable goals for the private sector to tackle. Those goals represent opportunities for companies to make an economic profit from solving social or environmental problems while at the same time creating positive change.

How does Robeco contribute to the SDGs?

Robeco contributes to the SDGs by integrating Environmental, Social and Governance (ESG) factors into the investment decision making process of various investment strategies. In addition, Robeco encourages companies to take action on the SDGs through a constructive dialogue with them and by voting at over 4’000 shareholder meetings.

Robeco sees the SDGs as a business opportunity for listed and non-listed companies.  Companies that align their business strategies with the SDGs will be more likely to anticipate future regulation and market developments. This will allow them to avoid the risk of losing their license to operate or facing future high costs of adjusting to structural changes too late.

Prahalad et al. and Porter et al. conducted empirical studies which demonstrated that business models that integrate ESG factors lead to innovation, process improvements, operational efficiencies and many other positive spill-over effects. These are likely to have a positive impact on financial performance. In turn, lagging sustainability performance may translate into supply chain issues, low employee productivity and litigation costs. Thus, the non-integration of SDGs could represent a financial risk.

Working towards the SDGs through active ownership

RobecoSAM’s Governance & Active Ownership team contributes to the achievement of the SDGs in two different ways. First, voting activities support environmental and social proposals that promote creation of long-term shareholder value. Second, the team encourages companies to take action on the SDGs through a constructive dialogue (engagement).

As an example, in the engagement theme ‘Environmental Challenges in the European Electric Utilities Sector’ electric utilities are encouraged to implement ambitious environmental strategies and, independently of their historical energy mix, focus on de-carbonization: moving from coal to gas to renewables and using meaningful internal carbon prices in their planning.

By encouraging 12 utilities to shift from coal to gas to renewables, we contribute to the realization of SDG 7 - Renewable Energy. During our engagement so far we have already seen substantial changes taking place in the sector. Two German utilities, for example, have drastically adjusted their business models in order to focus on renewable energy.

The ‘Social issues in the Food & Agri supply chain’ engagement theme is an example of how we encourage companies in the food industry to work towards the SDGs by considering smallholder capacity building and investing in its development. We encourage companies to support the development of the communities in which they operate by providing job skills training and education on agricultural techniques. This contributes to the achievement of SDG 1 - No poverty and SDG 2 - No hunger.

Through our ‘Board Quality’ and ‘Good Governance’ engagement themes we contribute to SDG 5 - Gender Equality. In these engagement programs we encourage companies to create well balanced boards in terms of gender, age and skills.

Conclusion

The financial industry, with its ability to direct capital towards sectors that offer the biggest opportunities to contribute to the SDGs, has a special role to play. The development of the SDGs agenda by the UN aligns well with Robeco’s current work. Sustainability criteria are integrated into investment processes across all asset classes and comprehensive active ownership activities address many SDGs.

Important information

The Robeco Capital Growth Funds have not been registered under the United States Investment Company Act of 1940, as amended, nor or the United States Securities Act of 1933, as amended. None of the shares may be offered or sold, directly or indirectly in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”)). Furthermore, Robeco Institutional Asset Management B.V. (Robeco) does not provide investment advisory services, or hold itself out as providing investment advisory services, in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act).

This website is intended for use only by non-U.S. Persons outside of the United States (within the meaning of Regulation S promulgated under the Securities Act who are professional investors, or professional fiduciaries representing such non-U.S. Person investors. By clicking “I Agree” on our website disclaimer and accessing the information on this website, including any subdomain thereof, you are certifying and agreeing to the following: (i) you have read, understood and agree to this disclaimer, (ii) you have informed yourself of any applicable legal restrictions and represent that by accessing the information contained on this website, you are not in violation of, and will not be causing Robeco or any of its affiliated entities or issuers to violate, any applicable laws and, as a result, you are legally authorized to access such information on behalf of yourself and any underlying investment advisory client, (iii) you understand and acknowledge that certain information presented herein relates to securities that have not been registered under the Securities Act, and may be offered or sold only outside the United States and only to, or for the account or benefit of, non-U.S. Persons (within the meaning of Regulation S under the Securities Act), (iv) you are, or are a discretionary investment adviser representing, a non-U.S. Person (within the meaning of Regulation S under the Securities Act) located outside of the United States and (v) you are, or are a discretionary investment adviser representing, a professional non-retail investor. Access to this website has been limited so that it shall not constitute directed selling efforts (as defined in Regulation S under the Securities Act) in the United States and so that it shall not be deemed to constitute Robeco holding itself out generally to the public in the U.S. as an investment adviser. Nothing contained herein constitutes an offer to sell securities or solicitation of an offer to purchase any securities in any jurisdiction. We reserve the right to deny access to any visitor, including, but not limited to, those visitors with IP addresses residing in the United States.

This website has been carefully prepared by Robeco. The information contained in this publication is based upon sources of information believed to be reliable. Robeco is not answerable for the accuracy or completeness of the facts, opinions, expectations and results referred to therein. Whilst every care has been taken in the preparation of this website, we do not accept any responsibility for damage of any kind resulting from incorrect or incomplete information. This website is subject to change without notice. The value of the investments may fluctuate. Past performance is no guarantee of future results. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. For investment professional use only. Not for use by the general public.

I Disagree