Five compelling reasons why investors should engage with SDGs - PRI/PwC report

Oct 12, 2017

The investment community should become more engaged with UN Sustainable Development Goals (SDGs) according to a new report,  SDG Investment Case, from The Principles for Responsible Investment (PRI) and PwC. 

The report outlines five compelling factors, from being a critical part of their fiduciary duty to the use of SDGs as a capital allocation guide, and focuses on the capacity for the  investment community to engage and achieve real-world impact as a result. 

It also explains what the UN SDGs are, as well as why there is an expectation that investors will contribute to them and – crucially – why investors should want to contribute to them.  As Paul Polman, CEO, Unilever noted in the report: “The SDGs offer the greatest economic opportunity of a lifetime”.

Key messages from The SDG Investment Case include:

  1. The SDGs represent the world’s most pressing environmental, social and economic issues and as such serve as a list of the material ESG factors that should be considered as part of an investor’s fiduciary duty.
  2. Large institutional investors – which can be considered as universal owners – can boost their long-term financial performance by encouraging sustainable economies and markets. With their portfolios exposed to growing and widespread economic risks, their investment returns depend on the continuing good health of the overall economy.
  3. Achieving the SDGs will be a fundamental driver of economic growth which, in the long term, will boost corporate revenues and earnings and, in turn, equities and other assets. The SDGs aim to create a model for this without compromising the environment or societies. 
  4. A significant proportion of currently external costs such as environmental damage or social upheaval might at some point in the future be forced into companies’ accounts. The uncertainty surrounding the timing and extent of this is critical to the risk landscape facing investors. The SDGs provide a way to reference the move towards a more sustainable world, ultimately strengthening investors’ ESG risk frameworks.
  5. Those investors that believe providing solutions to sustainability challenges offers attractive investment opportunities can implement strategies that target SDG themes and sectors, with opportunities available in most asset classes. While many investors are implicitly taking sustainability factors into account already, the SDGs give a common language with which to shape and articulate such investment strategies.

“The SDGs will have an important impact on the future development of the economy and financial markets,” says Kris Douma, Director of Investment Practice & Engagement, the PRI. “As drivers of global GDP growth, they are relevant for investors. For institutional investors who consider themselves as ‘universal owners’, not meeting the SDGs will potentially bring macro financial risks.”

Louise Scott, Global Sustainability Director at PwC, concludes, “The SDGs present an enormous growth opportunity for investors, organisations and the global economy.  Solving them will mitigate the risks that they pose to all businesses. 

“Every investor should want to understand how to play their part in achieving them. ” 

Ends.

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