The launch of the United Nations’ Financial
Innovation Platform in October 2016 called for direct engagement from the
financial sector in achieving the Sustainable Development Goals (SDGs). These 17
interlinked goals were established to guide international cooperation to
achieve sustainable development, end poverty, build peace and tackle climate
The swift response from the capital markets suggests a change in the way that the industry is set up to take action and support such crucial initiatives. The recent surge in investor demand for sustainable investment is well documented, but the response to the SDGs exposes nothing less than a realignment of capital markets around sustainable development at every stage of the value chain.
There now exists a well-developed infrastructure delivering fully-fledged opportunities for investors to align their financial objectives with sustainability goals such as equality, poverty, clean energy and more. The UN’s Financial Innovation Platform and the SDGs are compelling example of how industry participants are collaborating to successfully to channel finance into socially responsible projects and companies worldwide. Here we examine the new SRI value chain step by step, to reveal how capital markets players are redefining their role in sustainable development.
The powerful combination of clear objectives from a recognised sponsor and framework for implementation position these initiatives well for adoption by capital markets. .
Crucially, these specialists filter the companies in the index to meet sustainable development targets, such as tackling poverty and hunger, or promoting peace.
In the case of the Solactive SDG World Index, eligibility is based on Vigeo Eiris’ Equitics© methodology; only selecting companies which have a clear, positive net impact on sustainable development. Solactive, an index provider, then applies financial, risk and diversification filters to reach the final composition. This can now form the basis of a variety of investor products.
“With the Sustainable Development Goals Index series, Solactive is providing the basis for investment products that mirror the UN’s SDGs,” said Steffen Scheuble, CEO of Solactive AG.
“We are very pleased to support this initiative building momentum and capacity for sustainable growth and responsible investment. It is a smart solution meeting the growing expectations of investors towards companies’ contribution to the UN Sustainable Development Goals.” Nicole Notat, CEO, Vigeo Eiris.
The World Bank is a vital source of financial and technical assistance to developing countries around the world. Its activities focus on achieving two goals: ending extreme poverty by 2030, and promoting prosperity by fostering the income growth of the bottom 40% for every country. Every project supported by the World Bank advances the SDGs.
Through its annual borrowing program, the World Bank raises funding for its activities and offers investors a direct opportunity to support the SDGs. As a triple-A rated agency, it is also an appealing proposition for a very broad investor base.
Institutions like the World Bank and other development and public sector agencies can play a key role in raising funding for the SDGs-and for raising awareness of global development priorities in the capital markets.
“Achieving the Sustainable Development Goals will require increased collaboration from public sector, private sector, and individuals. The World Bank’s twin goals – eliminating extreme poverty and boosting shared prosperity – are aligned with the SDGs. By buying World Bank bonds, investors have the opportunity to support companies in a way that supports sustainable development,” said Arunma Oteh, Vice President and Treasurer, World Bank.
“This effort is in direct response to the UN Secretary-General’s launch of a Financial Innovation Platform (FIP) that calls for innovations and new financial models in support of the SDGs. Through this innovative program, we can help our clients meet their increasing need to align financial objectives with global sustainability objectives” says Olivier Osty, Executive Head of Global Markets, BNP Paribas.
Banks also connect the product with an investor base which includes institutional and retail investors to create the final links in this vital chain. Banks provide investors the chance to contribute to projects in the real economy which drive sustainable growth, within a structure that also addresses their financial and goals. The key enabler of the trend is the investors. Their appetite for sustainable investment opportunities is growing rapidly, driven by the ascendant influence of their own SRI policies and the increasing regulatory, and yield, incentives for sustainable activity.
Here we see a mature infrastructure in place empowering the capital markets universe to play a role in sustainable and responsible development worldwide, aligning investors’ financial goals with the funding needs of transformative sustainable development projects.