IMPACT

The Impact Journey

 

19 March 2020

Angelika Delen
Head of Institutional & Distribution Clients, and Social Responsibility Investment (SRI)


The 17 Sustainable Development Goals  are intended to ensure sustainable development at the economic, social and ecological levels.  The SDGs are designed to achieve the necessary transformation by 2030. But implementation requires capital − because we already have a financial gap that needs to be closed.


As already mentioned in the previous blog, there is currently both political and civil society pressure on the economy and financial industry to start with the implementation in order to achieve positive social, environmental and economic effects. With the taxonomy, the European Commission wants to stimulate private and public funds to a sustainable financing and thus direct the redirection of capital into sustainable, economic projects. The Fridays for Future movement has raised awareness of the urgency in society. Several companies in the financial sector have already started to include SDGs in their products. It is pointed out which of the 17 SDG objectives are consistent with the service/product/service.


Now I ask myself: what if we make our investment decision based on the impact or incorporate the impact analysis into the decision-making process? The SDGs provide the necessary framework, an orientation guide. But should we give priority to impact analysis? Currently, SDGs are applied to - often - existing products.  In studies of IWF or UN it is clearly pointed out, that there is almost no movement towards sustainable investments. According to the UN there is just a small amount out of the 200 tn. USD spent into sustainable investments. The IWF finding  was that there is a need of USD 0.5 trillion for low-income developing countries and USD 2.1 trillion for emerging economies in order to achieve the SDG goals.


We already know today where we urgently need capital. If we look at the 2030 climate and energy targets, we already know that we have an annual investment lack of around EUR 270 billion. (Source: European Commission: Action Plan: Financing sustainable growth, page 3 - estimates include modernization of transport and logistics, expansion of energy networks, major energy savings and renewable energy and improvement of resource management). USD 90 trillion is needed for new (global) infrastructure from 2015-2030 (Source, MMC, Financing for climate resilience, 2017). The capital market plays a key role in bridging the financial gap for the SDGs. The European Commission has gained this insight and is counting on it with its action plan.


Even though it is clear to all stakeholders that the capital market plays a key role here, it must also be said that the responsibility does not lie solely here. What about agriculture, construction, transport and technology? Here too, impact analyses and impact management are needed in order to take new steps and invest in the future.


We could ask the following question: what happens if we see impact investing as a central process and incorporate it in our decision-making? Wouldn't it automatically lead to a more focused implementation of the SDG objective? Wouldn't this result in new business models?  Because this much is certain: the actual potential is far from being exhausted and as ESG is already a standard analysis in the investment process for many, we could perhaps succeed in prioritizing the impact just as high and implementing it as a standard process. The result could surprise us: securing sustainable development on an economic, social and ecological level.

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