The most conservative investment bodies adjust investment strategies towards sustainability.
Albert Einstein said, “In the middle of difficulty opportunity lies.” The consensus among the nations on sustainable development goals is the opportunity to abridge the shortcomings in our national policies, global businesses, and investment focus areas. To achieve the goals and objectives of the SDGs we must use our resources wisely as there will never be enough resources to put separate funding for all the problems at once.
Like all other sectors, the investment sector is also adapting and expanding its business and investment models to meet the demands of the future aiming to meet the SDGs objectives. The adoption of the 2030 agenda pushed the governments to enact measures to promote environmental, social, and governance (ESG) issues. Considering the magnitude and complexity of investment for SDGs various players are involved, governments, regulatory authorities, venture capitalists, hedge funds, and a whole slew of other stakeholders including consumers. The core objective of sustainable investment is to serve the society in the long run by maintaining a balance between the interests of consumers and investors.
Diversification of investment for the SDGs goals does not mean the rejection of foundational concepts. It is about exploring avenues that justify the investment for the greater good. The government’s pension funds and social welfare initiatives for their employees are based on the same concept. However, the only catch here is to process all this investment or money through some SDG fund for businesses that are self-sufficient and provides additional revenue. The joint SDG fund is a program that provides support and incentivizes the policy shift for strategic investments required to meet the demands for SDGs. So far, this fund has funded 97 programs focused on SDG goals to meet the 2030 Agenda through 600 partnerships and over 100 innovative solutions.
There is another way of understanding this complex system of sustainable investment by simply looking at the impact of the investment. The term impact investment is a newer way to gauge the success of an investment. However, it is more direct with the core objective of solving a social or environmental issue while generating revenue concurrently. An impact investor might choose to invest in initiatives that are direct and profitable business upfront like solar and wind energy. On the other hand, they can join the local or state governments for initiatives like low-cost housing, educational facilities in low-income areas, and organic food production program. According to the 2020 sustainable investing report by KPMG, investment in ESF is a must-have rather than good to have. U.S. Forum for Sustainable and Responsible Investing shows that that impact strategies grew from $8.7 trillion to $12.0 trillion. Following are the main reasons that the number of investors who are interested in sustainable investment opportunities are increasing:
- Decision and policymakers are facilitating those who will provide money and other resources for sustainable solutions or support sustainable business ventures.
- There is a recognition among the investors that research and analysis in ESG can help in better financial planning and ultimately increase revenue.
- Businesses that invest in SDGs related targets get better recognition among the masses and governments.
According to the BSR, a global nonprofit business network and consultancy dedicated to sustainability, it is vital to apply a structured approach to engaging your investors, because it has been observed that engaging investors on sustainability is quite a demanding task. They proposed the following steps to engage the stakeholders.
In Fiji, the SDG fund supported the organic agriculture business and trained the local population through a public-private partnership. The main focus area of investment was agriculture and tourism. The project was successful and according to the reports than this project created 17000 new jobs. The total budget of the project was 2.54 million USD and 39% of that comes from the SDG fund. The government partnered with the UNDP, IFAD, and Fiji National Youth Council.
Artistic Milliners is one of the largest Denim manufacturing companies in Asia and they have deployed various programs to achieve the SDGs throughout their supply chain, both up and downstream. Their investment strategies are a set of multidimensional and synergic initiatives that are providing not just the employability to the workers but goes beyond the employability. They are following international certification protocols, training, and development initiatives to make them more worthy for the company and themselves, incorporating disable workers which would otherwise be a burden on the system. They have named their campaign #100days100lives to take onboard disabled workers and allow them to succeed. Furthermore, in COVID times when everyone was worried about survival the company provided free education, stationary resources, and food through the International Finance Corporation (IFC) program. Managing Director of Artistic Milliners, Mr. Murtaza Ahmed has been awarded the United Nations Global Compact SDG Pioneer in 2019 for Gender Equality and Decent Work. They have initiated the program of women employability under the umbrella of the UNDP Employability Program. They have achieved a milestone of 50% of women’s employability for their total workforce at junior and senior levels.
In the San Pedro region of Ivory Coast, the government joined hands with the UNDP, FAO, and UNICEF and started a skill development program to reduce the poverty. The total budget was 3.3$ million of which 44% of the program was funded by the SDG fund. The government invested money to eradicate forced and child labor. The fund provided free education and technical support for aquaculture and chicken rearing. These low-risk activities were relevant to the local population and the program was a success. Private investment started to grow since then coupled with food security and improved nutrition of the local population.
In conclusion, I would like to say that diversity in investment strategies is important and investors should invest “responsibly” by aligning their goals with the SDGs objectives. The investors, government, and private entities must understand that the amalgamation of traditional and sustainable investment is all about investing for a common good and best positioned to generate revenue as well. I believe that the great wisdom is not only in diversifying and maximizing the relative share of investment components in the portfolio but in making the investment strategy one in which sustainability becomes the most significant prism through which investments are examined in general.
Originally published at https://www.mikulitski.com on January 11, 2021.