From buzzword to baseline: Investors and SDGs

Engaging your investors on the SDGs is a key opportunity – so how do you do it right and make your business, and the world, better?

The market loves a buzzword and “SDGs” (Sustainable Development Goals, or Global Goals) are near the top of the buzzword money pile right now. Tap any combination of investing and SDGs into google and you are likely to get a full page of companies offering you SDGs as a service. From writing corporate ESG reports, to offering a means to invest in gender-parity, to consulting on sustainability options for your company, SDGs have become big business. This focus on the SDGs is admirable, but it is important for companies not to outsource their sustainability so as to check a box. Real implementation of SDG culture throughout your organisation is the only way to actually drive the achievement of these goals. The Purpose Business prides itself on being able to bring decision makers around a table and develop dynamic, thoughtful and realistic policies and programmes that will incorporate SDGs in a practical and effective way in the business. This approach, to stop, think and engage with the SDGs and your business; is of growing importance for shareholders and investors. The SDGs are often baseline requirement for investors, not just a buzzword.

There are multiple reasons to make SDG reporting part of a corporate strategy aimed at investors, and both business and investors stand to benefit. These include the development of new SDG-related goods and services; aligning values with investors, clients, suppliers and other stakeholders; driving broad adoption of SDGs and streamlining reporting on the SDGs.

The SDG Knowledge Hub references a report by an asset management company that aims to guide investor connections with the SDGs given the “global shift towards an ‘impact economy’”. This is in recognition of the fact that consumers, businesses and governments are questioning the impact of their transactional decisions – asking what the effect of their business interactions or policies are. There is a subtle but important shift to understanding that return on investment (ROI) is not limited only to the figures but social and environmental ROI have a weighted value in assessing a companies’ performance. In addition, factoring in the impact of an investment reduces risk – unsustainable investments are… unsustainable.

The enthusiasm for SDGs as a foundation for impact investing has not yet translated into success in Asia, where currently no country is on track to achieve the SDG goals by 2030 and, with regards to Goal 12 – promoting sustainable consumption, the region is actually moving backwards. Anyone who has lived in or visited Asia is aware of the constant, daily reminders of consumptive waste, it’s evident on our beaches, in our landfills and in our penchant for take-out that almost always comes wrapped in several layers of plastic!

The SDGs, as a definitive list of the world’s most pressing environmental, social and economic issues, articulate clearly the ESG factors that must be taken into account in order to fulfil fiduciary duties

Investing in the goals

All business and investors have a fiduciary duty to beneficiaries that means they have to account for the financial and risk decisions they make. The two factors influence each other in obvious ways. Given that environmental, social and governance (ESG) impact is core in terms of risk, it is equally core in terms of financials – if these risks are not properly mitigated it will cost the company long-term and to mitigate the risk requires cost short-term. This produces the balancing act companies must navigate between making good financial decisions and addressing ESG needs. The SDGs, as a definitive list of the world’s most pressing environmental, social and economic issues, articulate clearly the ESG factors that must be taken into account in order to fulfil fiduciary duties. In this way, the SDGs have become a useful and practical tool to guide business to fulfil ESG needs and, thus, fiduciary duties. There are several useful resources out there that help align business activities with SDGs, such as the SDG Compass and the Value Driver Model.

Depending on the nature of the business, it could impact multiple or single SDGs. Once they are identified, ways can be found to address them, for example, a food delivery company can source food from sustainable farms (Goal 15) and provide it in recycled/ reusable packaging (Goal 12). Depending on the size of the business and their values, SDGs could filter through to all their suppliers and clients or focus entirely on one core aspect of their activity. Either way, the positive knock-on effects will be felt and Investors understand that not all 17 goals will be impacted by a company, so it’s better to focus on those the company can really affect change in. The GIIN provides excellent and thorough examples of investors that have affected multiple goals through carefully thought out strategies that prioritised SDGs.

It is clear that there is a growing awareness amongst Asian investors of enterprises and activities that support sustainable development. In August 2019 the World Bank’s US$3.5 Billion 5-Year global benchmark bond for Sustainable Development attracted 36% of its investors from the region. Yet, as the UN PRI reported, “the main barriers to ESG integration are a limited understanding of ESG issues and a lack of comparable ESG data.” So how do we solve this?

Where to from here? How to make progress before the 2030 deadline

There are multiple resources for businesses and investors looking to reduce risk, enable fiduciary duty and support ESG through proactive implementation of strategies to achieve the SDGs. Taking SDGs from buzzword to baseline is achievable, risk-reducing and can have extensive positive knock-on effects; such as broad acceptance of SDG value across the business stream and the development of goods and services in line with the most urgent ESG needs.

TPB is aware that the task can seem daunting beyond simply mapping those SDGs relevant to the business. TPB’s expertise is in breaking down the broad SDG goals into the 169 targets and over 260 indicators relevant to your business and mapping them directly to company activities. TPB has the expertise to build a detailed accountability structure around a company’s SDG strategy. Rather than broadly linking the company with SDG goals as a whole, we help make practical and implementable changes that bring about substantive change. In driving the adoption of SDG goals in a practical way, we continue our efforts to help Asian business be a force for good.