Growing evidence links long term investment performance with impact. Could private equity help get the Sustainable Development Goals back on track?
Private equity’s estimated USD2.5 trillion in unspent funds can help put sustainable development, and achieving the UN’s Sustainable Development Goals (SDGs), back on track. This is not only good for the planet but also good business, as growing evidence links long term investment performance with impact and environmental, social and governance (ESG) issues.
Our recent, world first, SDG aligned private equity financing agreement highlights a positive trend which we hope will accelerate. Since we closed our first deal, we have provided more than USD500 million in funding into infrastructure, clean energy and healthcare.
Private equity’s growing involvement is critical as, even before the outbreak of COVID-19, the UN Secretary General warned that the world was seriously off track in achieving the 2030 targets as set out in the SDGs.
Mind the sustainable investing gap
The United Nations Development Programme (UNDP) estimates that there is a USD2.5 trillion a year investment gap, especially in emerging markets. This is likely to have worsened in the past six months and governments dealing with the immediate response to the pandemic are even more financially constrained.
A possible silver, or maybe ESG, lining to this cloud, comes as government’s face unprecedented economic and financing challenges. Private investors are seeing an upswing in interest in supporting sustainable investment.
Our most recent Sustainable Investing Review highlighted that, regardless of where they are from or their age, a majority of investors now want to invest sustainably. We have also seen record inflows from corporate clients into our SDG aligned money market deposit.
Tackling the obstacles to sustainable investment
Our Sustainable Investing Review also highlighted that the biggest obstacles for high net worth individuals to invest into sustainable finance is a lack of information on the opportunity and a lack of transparency around the impact those investments could have. The lack of generally accepted standards is one of the biggest issues behind this lack of clarity both at the retail and institutional level.
We are actively trying to tackle the lack of information and standards. Our Opportunity2030 SDG Investment Map shared country by country information across emerging markets of the USD 10tn investment opportunity across just three SDGs. We are also actively working with the UNDP on the development of their SDG Private Equity Principles.
UNDP’s stewardship for the SDGs enables them to offer tools on a neutral platform. As UNDP’s SDG Impact Director, Elizabeth Boggs-Davidsen, notes, “if ever we needed ambitious shared goals and standards to open paths to a better future, it is now.”