Here are four reasons why the private sector should engage with the SDGs:
1- Identifying opportunities:
The SDGs help translate global needs into investment opportunities where private money can fund the gap that exists in the absence of government funding. The Better Business, Better World report by the Business and Sustainable Development Commission identified at least $12 trillion of market value that could be opened up in sectors such as food and agriculture, cities, energy and health.
Research shows that companies that focus on materiality, narrowing their focus on high-impact sustainability issues related to their core business, are more innovative and perform better. Companies that have mapped their practices to the SDGs include Volvo, Unilever, Panasonic and Siemens.
2- Driving Impact:
Increasingly, investor stakeholders want to see how their capital is being used to positively affect the bigger picture. The SDGs can help institutional investors transition from a “cause no harm” investment approach to one that focuses on long-term development outcomes, achieving targets that have been globally agreed and quantitatively defined.
Global investment firm AllianceBernstein is creating a unique climate risk and investment performance curriculum for its finance professionals who handle its $581 billion in assets under management. All investment teams at AB will learn how to evaluate companies’ risks and opportunities associated with rising sea levels, wildfire hazards, predictive modelling for extreme weather and other potential consequences of climate change.
Some, such as Dutch pension managers PGGM and APG, are integrating the SDGs into their investment decision making. Indexes are also aligning to the SDGs: the MSCI ACWI Sustainable Impact Index includes companies that derive at least 50% of their revenue from products and services that address five actionable themes mapped to the SDGs. FTSE Russell’s ESG Ratings, while S&P Dow Jones Indices are contributing to research and indices relatedto the SDGs.
The UN Global Compact, representing 9,000 companies and the Principles for Responsible Investment, representing, 1,700 investors, encourage their members to support the SDGs. The first general-purpose SDG-linked US$ 1.5 billion bond was released by Enel in September and was almost three times oversubscribed.
3- Managing Risk:
The SDGs are guiding future government regulations and policies. As a result, sector alliances like Food and Beverage companies are partnering to ensure fair and safe supply chains and reduce risk, linking to SDGs ‘No Hunger’, ‘Life on Land’ and ‘Partnership for the Goals.’ For example, Unilever, the world’s biggest tea company, aims to sustainably source all of its tea by 2020 by working with certification bodies like Rainforest Alliance.
The maker of Lipton Tea is also using a pilot blockchain and other data technologies to create a data system for tea farmers to create standardized information about their product, its quality and price available to all parties, making it traceable and transparent. The project, in collaboration with Barclays, BNP Paribas, Rabobank and Standard Chartered, has the potential to use the data to offer preferential access to credit and lower the cost of working capital.
4- Fuelling Collaboration:
The private sector is committing to achieving the SDGs through multi-stakeholder partnerships with exponential impact. Unique forms of collaboration are emerging across sectors and even among competitors.
It’s about moving from a linear ‘take-make-waste’ economy to a regenerative circular and inclusive economy – using systems thinking to ensure responsible sourcing, manufacturing, distribution and recycling and reuse throughout the supply chain. The New Plastics Economy Global Commitment led by the Ellen MacArthur Foundation has signed up more than 400 companies to a vision to stop plastic waste and pollution at source by applying circular economy principles.
