Five years of SDGs, five lessons learned

“The 17 SDGs present a massive business opportunity in investing in the sustainable future of people and planet. These range from investing in infrastructure, housing, food and medicines, to renewable energy, providing finance and insurance to those that need it, and means of cutting waste. One estimate suggested the SDGs could mean as much as USD 12 trillion of market opportunities per year. The SDGs also provide a means of identifying and then mitigating risks. Not understanding the trend of the transition to a lower-carbon economy, for example, may pose a real risk of having a business rendered unviable by changing consumer demand or regulation.”

“Some progress has been inspired by the SDGs. Since 2015, the number of women elected to parliaments has risen from 19% to 24% (SDG 5: gender equality); 17.5% of total final energy consumption now comes from renewables (SDG 7: affordable and clean energy); and the portion of the ocean now legally protected has more than doubled to 17% (SDG 14: life below water). But at the same time the challenges are, unfortunately, alarming: biodiversity is eroding at unprecedented rates, the world continues to warm, inequality is widening and hunger is on the rise. Meanwhile, the Covid-19 pandemic is an unparalleled health challenge with dire economic consequences. There remains a massive funding gap of between USD 2.5 and USD 3 trillion in investment that is still needed each year in order to meet the goals by 2030.”

“The 17 SDGs are not isolated silos, they are interconnected – eradicating poverty (SDG 1) gives people the means to end hunger (SDG 2) and thereby improve their health (SDG 3). But there are also negative overlaps; building infrastructure (SDG 9) typically means increasing greenhouse gas emissions, making it harder to solve climate change (SDG 13). Agriculture accounts for 70% of water withdrawals, assisting with SDG 2 (zero hunger) but adversely impacting SDG 6 (clean water and sanitation), while the use of fertilizers and pesticides threatens life on land (SDG 15). The only way in which the SDGs will be achieved is if we manage these interactions: negative interactions, or trade-offs, must be avoided or mitigated, while positive interactions bring opportunities for advancing multiple goals at the same time, thus creating bigger impacts across a wider scale.”

“At Robeco, we believe that investors can make a difference. One way is to allocate capital to companies that can help achieve the goals. This can mean buying the equities or bonds of companies that contribute to one or more SDGs, and avoiding financing the companies that are not in line with them. We also innovate to create investment vehicles that direct capital towards solutions, like our Smart Energy, Healthy Living, Sustainable Water, Green Bonds and SDG strategies. A second way in which investors can make a difference is through active ownership. By using our position as active owners, we can use voting and engagement to effect changes. Robeco’s engagement with energy company Enel, for example, led to the appointment of a wind power expert as a climate competent director. By nominating a director with climate experience, the goal is to help Enel move away from fossil fuels and towards renewables, and become carbon neutral by 2050.”

“Investment focuses on putting money into a company, but a broader mindset is needed to measure what this money achieves regarding the SDGs. While we can (and do) quantify the value of our investments that positively and negatively impact the SDGs, we are also looking further to assess what impacts our investments have on improving people’s lives and promoting environmental sustainability. For example, we estimated that for each EUR 1 million invested in the RobecoSAM Sustainable Water strategy, 47 million liters of clean water is distributed, equal to the water use of 430 European households. Such insights help identify which companies make the best contributions to the SDGs, at the lowest costs.”