Converging at the Intersection of Impact Investing and the Sustainable Development Goals
As the IDP Foundation made its rounds in New York City during the 71st Session of the UN General Assembly in September, a constant theme surrounding the efforts of the United Nations Sustainable Development Goals (SDGs) resonated throughout many of the sessions. In fact, the general debate, “The Sustainable Development Goals: A Universal Push to Transform Our World,” included 181 Member States mentioning the SDGs in their statements, with many stressing the importance of putting the goals to work.
A little over a year ago, the 193 Member States of the United Nations agreed to adopt the Sustainable Development Goals, a global agenda to end poverty by the year 2030. These SDGs are made up of 17 goals that focus on many factors like gender equality, education, protecting the planet, ending hunger, and others that support living sustainably and eradicating injustices in the world. These goals recognize that social and environmental objectives are connected, and they affect everyone in our global community.
As part of this agenda, the UN submitted a call-to-action for the private sector to play a larger role in achieving these goals, identifying impact investors as a key group in accelerating the progress of the agenda and making its success a reality.
Recently, impact investing (investments intended to generate financial and social/environmental return) has made a big splash in the finance/investing sector. Although this practice has been in effect for nearly ten years, its proliferation has been supported by individuals and organizations seeking ways to create social impact alongside their financial returns, often using ESG principles (environmental, social, governance) to identify businesses that generate these types of results. One group in particular driving this activity has been millennials, as they have shown more interest in enterprises contributing to the greater good of humanity and the planet.
[Millennials] want to work in a place they feel is going to have a positive impact on the world. They’re twice as likely to invest in stock or a fund if sustainability is part of the value-creation thesis. Audrey Choi – CEO, Morgan Stantley’s Institute for Sustainable Investing
In a recent article published by The Globe and Mail, Morgan Stanley’s Institute for Sustainable Investing CEO Audrey Choi stated, “[Millennials] want to work in a place they feel is going to have a positive impact on the world. They’re twice as likely to invest in stock or a fund if sustainability is part of the value-creation thesis.” Referencing a recent study conducted by Morgan Stanley, Choi shared that “84 percent of millennials were interested in sustainable investing.” They are twice as likely to check product packaging to ensure sustainability (40% of Millennial investors, compared to 22% of the total individual investor population). They are twice as likely to exit an investment position because of objectionable corporate activity (15% of Millennial investors, compared to 7% of the total individual investor population).1
We don’t have years to wait for progress on these global goals. Data confirms 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. Amit Bouri – CEO, Global Impact Investing Network (GIIN)
We have now reached a point where the SDGs and impact investing have organically converged as their objectives are closely aligned. In his recent op-ed for Institutional Investor, Global Impact Investing Network (GIIN) CEO Amit Bouri called on investors to make impact-focused investments that align with the SDGs. “We don’t have years to wait for progress on these global goals. Data confirms 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.”
While the IDP Foundation is currently 88% mission aligned, we endeavor to explore further how our investments fit into the SDG framework, and how to use the SDG alignment as a determining factor when choosing future investment opportunities. The IDP Foundation has identified that much of its work intersects at goals 1, 4, 5, 8 and 17, and addresses a myriad of their targets and indicators. We believe that philanthropic support – whether grants or impact investments – should take the SDGs into consideration when making decisions on what organizations and enterprises to support.
We understand that impact investing plays a pivotal role in unleashing private capital that can address social issues. We also see significant evidence – as outlined in the above Morgan Stanley report – where many impact investors have stated that their ROIs matched or outperformed financial benchmarks of comparable traditional investments. This finding alone should assuage apprehensions of traditional investors who choose to invest solely for profit out of fear that sustainable investments will not generate favorable returns.
To successfully reach the SDGs by 2030, investors must commit to a mind shift, and impact investing has the influence to make the financial sector view investing through a lens that shows financial and social gain as not mutually exclusive, but rather complementary in making our global community a better place for all.