latames
The road ahead for the SDGs

The road ahead for the SDGs

Perspectiva anual

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).

Los temas relacionados con este artículo son:
Logo

Información importante

Los Fondos Robeco Capital Growth no han sido inscritos conforme a la Ley de sociedades de inversión de Estados Unidos (United States Investment Company Act) de 1940, en su versión en vigor, ni conforme a la Ley de valores de Estados Unidos (United States Securities Act) de 1933, en su versión en vigor. Ninguna de las acciones puede ser ofrecida o vendida, directa o indirectamente, en los Estados Unidos ni a ninguna Persona estadounidense en el sentido de la Regulation S promulgada en virtud de la Ley de Valores de 1933, en su versión en vigor (en lo sucesivo, la “Ley de Valores”)). Asimismo, Robeco Institutional Asset Management B.V. (Robeco) no presta servicios de asesoramiento de inversión, ni da a entender que puede ofrecer este tipo de servicios, en los Estados Unidos ni a ninguna Persona estadounidense (en el sentido de la Regulation S promulgada en virtud de la Ley de Valores).

Este sitio Web está únicamente destinado a su uso por Personas no estadounidenses fuera de Estados Unidos (en el sentido de la Regulation S promulgada en virtud de la Ley de Valores) que sean inversores profesionales o fiduciarios profesionales que representen a dichos inversores que no sean Personas estadounidenses. Al hacer clic en el botón “Acepto” que se encuentra en el aviso sobre descargo de responsabilidad de nuestro sitio Web y acceder a la información que se encuentra en dicho sitio, incluidos sus subdominios, usted confirma y acepta lo siguiente: (i) que ha leído, comprendido y aceptado el presente aviso legal, (ii) que se ha informado de las restricciones legales aplicables y que, al acceder a la información contenida en este sitio Web, manifiesta que no infringe, ni provocará que Robeco o alguna de sus entidades o emisores vinculados infrinjan, ninguna ley aplicable, por lo que usted está legalmente autorizado a acceder a dicha información, en su propio nombre y en representación de sus clientes de asesoramiento de inversión, en su caso, (iii) que usted comprende y acepta que determinada información contenida en el presente documento se refiere a valores que no han sido inscritos en virtud de la Ley de Valores, y que solo pueden venderse u ofrecerse fuera de Estados Unidos y únicamente por cuenta o en beneficio de Personas no estadounidenses (en el sentido de la Regulation S promulgada en virtud de la Ley de Valores), (iv) que usted es, o actúa como asesor de inversión discrecional en representación de, una Persona no estadounidense (en el sentido de la Regulation S promulgada en virtud de la Ley de Valores) situada fuera de los Estados Unidos y (v) que usted es, o actúa como asesor de inversión discrecional en representación de, un inversión profesional no minorista. El acceso a este sitio Web ha sido limitado, de manera que no constituya intento de venta dirigida (según se define este concepto en la Regulation S promulgada en virtud de la Ley de Valores) en Estados Unidos, y que no pueda entenderse que a través del mismo Robeco dé a entender al público estadounidense en general que ofrece servicios de asesoramiento de inversión. Nada de lo aquí señalado constituye una oferta de venta de valores o la promoción de una oferta de compra de valores en ninguna jurisdicción. Nos reservamos el derecho a denegar acceso a cualquier visitante, incluidos, a título únicamente ilustrativo, aquellos visitantes con direcciones IP ubicadas en Estados Unidos.

Este sitio Web ha sido cuidadosamente elaborado por Robeco. La información de esta publicación proviene de fuentes que son consideradas fiables. Robeco no es responsable de la exactitud o de la exhaustividad de los hechos, opiniones, expectativas y resultados referidos en la misma. Aunque en la elaboración de este sitio Web se ha extremado la precaución, no aceptamos responsabilidad alguna por los daños de ningún tipo que se deriven de una información incorrecta o incompleta. El presente sitio Web podrá sufrir cambios sin previo aviso. El valor de las inversiones puede fluctuar. Rendimientos anteriores no son garantía de resultados futuros. Si la divisa en que se expresa el rendimiento pasado difiere de la divisa del país en que usted reside, tenga en cuenta que el rendimiento mostrado podría aumentar o disminuir al convertirlo a su divisa local debido a las fluctuaciones de los tipos de cambio. Para inversores profesionales únicamente. Prohibida su comunicación al público en general.

No estoy de acuerdo