Since 2015, the United Nations’ Sustainable Development Goals (SDGs) have served as a comprehensive framework for solving some of the world’s most pressing problems. Yet effectively fitting any number of the 17 SDGs into an investment philosophy can be challenging, especially since each has its own urgency while intersecting with several others. Still, the number of SDG-aligned investment strategies is rising as investors seek clarity around their capital’s true impact, according to the Global Impact Investing Network (GIIN).
A Brief History of Sustainable Development
The topic of sustainable development began surfacing throughout activist and academic communities in the 1960s in response to unfettered industrial and commercial growth following World War II. By the early 1980s, issues had evolved to the point where the UN created the World Commission on Environment and Development. In 1987, that group published Our Common Future, also known as the Brundtland Report.
The report lays out the challenges of achieving equitable economic prosperity while allowing for both the common good of mankind and the environment. It also synthesizes the concept of sustainable development into a succinct definition: “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
The Brundtland Report laid the groundwork for the 1992 UN Conference on Environment and Development. More commonly known as the Earth Summit, that conference saw representatives from more than 100 countries endorse Agenda 21, an extensive approach to tackling environmental and socioeconomic issues.
Subsequent gatherings furthered the discussion through 2015, when all UN member states adopted the 2030 Agenda for Sustainable Development and its 17 goals.
SDG Investing Gains Momentum
The financial resources required to accomplish the 17 SDGs by 2030 are formidable—the UN projects an annual $2.5 to $3 trillion gap in funding for developing nations alone. This means that investors interested in SDG alignment have a wide range of entry points for seeking impact and returns. In 2018, the GIIN published a series of case studies showcasing the opportunity for impact investors to help finance a variety of SDGs.
While an investment does not need to intentionally and explicitly target an SDG in order to support sustainable development, many impact investors have found the SDGs a useful framework. In its 2020 edition of The State of Impact Measurement and Management Practice, the GIIN reports that 72% of survey respondents use the SDGs as an impact measurement and management framework, far more than any other tool. This is an encouraging statistic, as the Principles for Responsible Investment (PRI) has noted that defining, targeting, and measuring intended and unintended outcomes is essential for promoting the SDGs. PRI itself recently released a new framework for SDG investing, noting increasing interest from signatories.
Reacting to the SDG investing trend, some see a risk of impact washing and call on investors to engage even more deeply. Writing in the Stanford Social Innovation Review, Harald Walkate and Cary Krosinsky outline steps toward a “more enlightened approach” to the field. “Investors around the world are sticking SDG icons on their marketing materials after conducting only the most cursory analysis of how their investments are contributing to solving problems,” they write. “This SDG mapping is, at best, a good starting point, in that it is making more people ‘SDG aware.’ At its worst, however, it is giving people the sense that there is not much to it and that if we keep this up, we will soon achieve the SDGs.”
Want to learn more about investing in sustainable development? Read:
- What Are the Sustainable Development Goals?
- How Are Impact Investors Using—and Achieving—the SDGs?
- UN Sustainable Development Goals, Human Rights, and Business