The United Nations Global Compact yesterday issued a call to action to finance the implementation of the 2030 Agenda for Sustainable Development and to address the financing gap, estimated at US$ 2.5 trillion annually.
The call to action urges business, Governments and other actors to work with financial intermediaries to raise the financing needed to achieve the Sustainable Development Goals (SDGs). It encourages stakeholders to find new ways to measure and communicate their progress on and contributions towards the sustainability agenda, while showcasing the long-term business benefits to investors.
These topics were discussed on the sidelines of the 2019 World Economic Forum Annual Meeting in Davos, where the UN Global Compact and PIMCO co-hosted an event that brought together business, investors and financial intermediaries to discuss new strategies and financial tools for mainstreaming SDG investments. The UN estimates that approximately US$ 5 to 7 trillion will need to be mobilized each year to achieve the Sustainable Development Goals and this need cannot be met by aid alone.
“Financing the Sustainable Development Goals is a big challenge, but not an insurmountable one,” said Lise Kingo, CEO & Executive Director of the UN Global Compact. “Study after study shows that there is no long-term trade-off between sustainability and investment returns — indeed, we believe that we must keep pushing towards a tipping point in mainstream investing, which will reward the principles-oriented investor.”
Sustainable finance matches issuers’ needs of investments in sustainable business strategies with socially responsible investors’ expectations. Corporate SDG business models have emerged as another way to fund SDG-aligned private sector activities, and a shift in the perspective among investors can further help direct funds towards sustainable business models instead of standalone green projects. Fixed-income instruments, such as SDG Bonds, can become new solutions to mainstream SDG investments and to bridge the funding gap.
“Financing the Sustainable Development Goals will require that we all work together — the public sector, private finance and civil society,” said Scott Mather, Chief Investment Officer at PIMCO, speaking at the event in Davos. “Through new innovations, such as SDG Bonds, we believe that we can help mainstream impact investing strategies to deliver returns and positive social and environmental outcomes. This is in everyone’s interest — and will help us achieve sustainable and inclusive economies and societies.”
The ultimate goal is to create a market that is sufficiently large, liquid, diversified and transparent for institutional investors to meaningfully contribute to the implementation of the 2030 Agenda.
“Investing with the SDGs in mind can be profitable and that is why we must be fundamentally optimistic about the achievability of the 2030 Agenda,” Lise Kingo said.
The UN Global Compact Action Platform on Financial Innovation for the SDGs serves as an incubator of ideas, concepts and recommendations to unlock private capital and create a market for mainstream SDG investments. The platform engages leading businesses, banks and investors to identify innovative solutions to leverage global capital markets for the SDGs.
Last year, the Action Platform released a report entitled SDG Bonds & Corporate Finance – A Roadmap to Mainstream Investments to inspire and guide stakeholders involved in the implementation of the 2030 Agenda to tap into the private capital markets and benefit from cheaper and more reliable funding.