In Financing the Sustainable Development Goals: Impact Investing in Action, the Global Impact Investing Network (GIIN) tasked the impact investing community with taking coordinated action to help achieve the United Nations’ Sustainable Development Goals (SDGs). The SDGs target global improvements in 17 key areas—from prosperity, health, and education to infrastructure, the environment, and justice—by 2030.
Many institutional investors have already begun tracking their existing portfolios against the SDGs. However, the GIIN’s September 2018 report suggested that those measures may not be not sufficient: “In order to truly contribute to the achievement of these goals by 2030, impact investors must raise and direct new capital to address these pressing social and environmental problems.”
The UN’s Sustainable Development Goals
The 17 Sustainable Development Goals and their 169 associated targets were adopted in 2015 and grew out of the Millennium Development Goals, which comprised eight action plans to improve life in developing countries. With achievements like reducing the number of the world’s poor by half and driving a 58% decline in malaria mortality rates, the success of the Millennium Development Goals encouraged the UN to establish a broader plan for 2015 to 2030.
In an article published by the World Economic Forum, Columbia professor and Earth Institute director Jeffrey D. Sachs argued that the SDGs are important for their ability to mobilize individuals and organizations toward a common purpose. The “multi-stakeholder process is essential for tackling the complex challenges of sustainable development and the fight against poverty, hunger, and disease,” Sachs wrote.
The UN esimates that the implementation of the SDGs would require $5 to 7 trillion, a number well above the $142.6 billion in official development assistance reported by the Organisation for Economic Co-operation and Development’s Development Assistance Committee in 2016. This funding gap—and the potential for new investment opportunities—is why organizations like the GIIN are looking to impact investors to use the SDGs to help shape their portfolios.
Using the SDG as a Framework for Impact Investing
According to the GIIN report, in 2017 more than half of impact investors used the Sustainable Development Goals to measure at least some of their impact performance. A smaller group took this a step further, proactively building investment strategies and products around the SDGs. The following three examples are from investors profiled in Financing the Sustainable Development Goals.
Blue Like an Orange Sustainable Capital has set up a Latin America fund that specifically targets six of the UN goals: no poverty, good health and well-being, gender equality, sustainable cities and communities, quality education, and responsible consumption and production. The fund finances mezzanine debt in Brazil, Chile, Colombia, Mexico, and Peru, with a focus on infrastructure projects, agribusiness, healthcare, and sustainable finance.
Before approving an addition to the fund, the Blue Like an Orange deal-sourcing team must demonstrate how each investment fits in with the SDGs. Then the asset manager works with the company to map out impact targets using the SDGs and their underlying indicators. If a company fails to achieve its objectives, Blue Like an Orange helps management shift strategies. The firm has invested $30 million with a Brazilian coconut water company with ambitions to reshape the industry. The coconut water company prioritizes gender diversity in its appointments to science positions and provides jobs to local workers in the region, both in support of the SDGs.
Another example is fund manager Mirova, who raised $120 million to invest in projects that combat land degradation (SDG #15) by supporting restoration and sensible land management. Mirova’s Land Degradation Neutrality Fund provides forestry and agriculture projects with long-term financing that cannot be obtained normally on the open market from commercial lenders. In one case, it has supported the building of a sustainable rubber plantation in Indonesia on 91,000 hectares of land, half of which is planned for rubber and half of which is dedicated to conservation and providing local employment.
Finally, in the Netherlands, pension fund service provider PGGM has developed an impact portfolio called Investing in Solutions that targets specific SDGs for clean energy, clean water, and ending hunger, among others. The firm has raised €13.7 billion ($15.7 billion USD) for its impact portfolios so far. Investing in Solutions has invested in SolarCity, now a subsidiary of Tesla, that builds and installs solar panels on residential and commercial buildings, helping reduce greenhouse gas emissions.
“A variety of actors are using SDGs as their template for doing good in the world,” Piet Klop, PGGM’s senior adviser of responsible investment, is quoted in the GIIN report as saying. “[S]o we think it’s smart to get on board, instead of pursuing our own unique approach to impact that nobody else is using.”