The U.N.’s SDGs Deliver a Capital Call to the World
With the United Nations’ Sustainable Development Goals celebrating a one-year anniversary, it’s time to take stock of impact investing portfolios.
This month marks the one-year anniversary of the world coming together at the United Nations to agree on the U.N. Sustainable Development Goals (SDGs), a 15-year vision to end poverty, protect the planet and ensure prosperity for all. But the U.N. is only as strong as the collective political will of its member nations. We live in volatile times, in which agreement and political unity within and among nations seem in short supply. Passing and enacting government-mandated policies affecting such a broad reach of issues can be a years-long process, even in the most harmonious of times.
The SDGs address poverty, hunger, clean water and energy, gender inequality, health, education and a host of other issues that relate to sustaining life on the planet and making our world more just. We risk grave disappointment around this intergovernmental agenda, however, unless we fully engage the financial industry through targeted impact investments. These are investments made with the intention of generating positive social and environmental impact alongside a financial return.
We don’t have years to wait for progress on these global goals. Data confirm that the widening gap between rich and poor and the declining health of our environment cannot continue if we are to have a livable world. The need for creating a more sustainable planet has never been greater. Financial leaders have the means to accelerate progress. Investment managers are in the business of moving money to where it works best, and for an increasing number of them and their clients, the definition of “working best” is quickly evolving to include impact goals.
According to the Boston Consulting Group, global asset managers controlled more than $70 trillion as of year-end 2015. If only a fraction of these funds were dedicated to helping advance the Sustainable Development Goals, we could make great strides. That is why the Global Impact Investing Network (GIIN) is calling on investors and money managers everywhere to commit capital to impact investing efforts aimed at meeting the SDGs.
Impact investing is no longer just a feel-good footnote to an investor’s portfolio. Nine years on from when the term was coined, impact investing has become a vibrant industry, offering proven financial returns and demonstrable social and environmental progress. These efforts aren’t philanthropy, although they can be a powerful complement to philanthropy, and philanthropic organizations are increasingly looking for impact investment opportunities that put more of their money to work. This approach is a new way to think about the role of capital and investment while maintaining the principles that have made capitalism an incredible engine for growth. Impact is about investing in more than just financial returns. It is investing in the future of our children, our communities and our planet.
A report compiled in 2015 by the GIIN and Cambridge Associates found that private impact-focused funds had returns that were comparable to non-impact-focused funds. In the GIIN Annual Impact Investor Survey, published earlier this year, approximately 90 percent of impact investors said their returns met or exceeded financial expectations. Impact investing harnesses the enormous power of investment capital and supplements the outstanding work already being done by charitable foundations, governments and nongovernmental organizations. It has gained tremendous popularity as large institutional investors such as pension funds and insurance companies have joined the ranks of private wealth funds and family offices. Many of the world’s largest financial institutions are aware of the tremendous power of impact investing and have instituted or are exploring impact investing strategies. There is no better industry ready to answer the U.N.’s call to the private sector in helping make the SDGs a reality.
PGGM, the Dutch pension fund manager that controls more than €200 billion ($225 billion) in responsible investments, is aligning its four impact investing lines of business with six of the Sustainable Development Goals. Credit Suisse has impact investing activity aimed at nearly every single SDG.
We applaud efforts from high-profile leaders who have risen to the occasion over the past year. Bold undertakings by well-recognized public figures demonstrate that ambitious citizens understand the power of the great untapped potential of investment capital. Our financial system is seeing one of the largest transfers of wealth in history, in which an estimated $16 trillion will be passed between generations of high-net-worth individuals. Millennials bring to the markets a greater expectation that their funds will be used in part to benefit the planet. They understand that a retirement nest egg is of little use on a planet without clean air and safe water.
Despite this surging popularity and demand for impact investing, they are not enough. Changing our world to meet the Sustainable Development Goals is a monumental effort. Collective action will be needed if these aspirational goals are to see progress in the ambitious time frame established. We ask that every investor not already involved make at least one SDG-focused impact investment — and get started on this effort immediately.
The price of doing nothing is too high for such large amounts of capital to be left on the sidelines. We call on all investors — endowments, asset managers, foundations, banks and others — to begin focusing capital in a way that will not only provide returns but also help make our world healthier and more prosperous. This investment is not just for profit — but for survival.
Amit Bouri is the CEO of the Global Impact Investing Network, a nonprofit organization in New York that is dedicated to increasing the scale and effectiveness of impact investing.