Updated: Jun 14, 2021
As a response to the climate emergency and social crises, the United Nations has established a set of Sustainable Development Goals, to be achieved by 2030. These are organized in 17 concrete objectives to tackle global issues in order to reach a sustainable and peaceful future for everyone, everywhere. The SDGs aim to bring together all countries, private companies, and individuals to promote a prosperous future while protecting the planet. The achievement of a particular goal is often interlinked with the others, as will be seen in our series of articles.
In this article, KIMPA analyzes investment alternatives which contribute to the 17th SDG, aiming to foster strong and resilient partnerships and cooperation in order to achieve the 16 previous SDGs.
To finish our series on the SDGs, we are going to explore an uncommon one, which truly illustrates the interconnectivity between each goal. In order for the SDGs to be achieved successfully, inclusive partnerships are essential at all levels - global, regional, national and local - with common principles and values. A shared vision is vital for a more sustainable world where no one is left behind.
The covid-19 pandemic has revealed the immense fragility of our world and has exacerbated inequalities within and among countries. This has made the implementation of the SDGs even more urgent, as vulnerabilities were exposed in our health and climate systems, access to finance and food security, and international trade. The pandemic itself and the ensuing economic crisis are both global problems and can therefore only effectively be solved by global co-operation and strong partnerships between countries, civil society and the private sector. These actors must work together to address challenges like biodiversity loss, rising inequalities, human rights violations and climate change.
The targets of the 17th SDG are organized around several pillars including finance, technology, capacity-building, trade, institutional coherence, and monitoring of the goals.
Many developing and least developed countries require Official Development Assistance (ODA) to encourage growth and trade. ODA consists of money transfers from developed countries and totaled $147.4 billion in 2019. To achieve the SDGs, it is important that developed countries fully implement their commitments to provide ODA in the proportion of 0.7% of their Gross National Income. This can also assist developing countries in attaining long-term debt sustainability as ODA fosters debt financing, debt relief and debt restructuring.
Foreign Direct Investment (FDI) is also a way for countries to mobilize resources and improve their domestic capacities. Nonetheless it is expected to decline by up to 40% in 2020 due to the contraction of the global economy ensuing the covid-19 pandemic and the fact that developed countries will dedicate a large part of their budget to reconstruction programs.
Technology is a major catalyzer of progress and development. Promoting the transfer, dissemination and diffusion of environmentally sound technologies to developing countries, including on concessional and preferential terms can improve access to science, innovation and knowledge in general. The SDGs require enhanced North-South and South-South cooperation for improvements in all sectors from health (SDG 3) to infrastructure (SDG 9), from access to clean water (SDG 6) and affordable renewable energy (SDG 7) to cleaner and more sustainable cities (SDG 11).
A wide range of welfare gains can be attributed to increased trade, such as less costly access to goods and services and increased production and employment levels. Promoting fair trade can boost development in the countries which most need it.
To this end, SDG 17 seeks the implementation of duty-free and quota-free market access and to promote a universal, rules-based, open, non-discriminatory and equitable multilateral trading system, through the World Trade Organization (WTO).
As of now, 79% of imports from developing countries enter developed countries duty-free.
Data, monitoring and accountability
Without data to prove the efforts, we cannot track or compare progress. The lack of incentive and competition across firms will slow the path of improvement in any sector. This is why quantifiable data and the means to acquire and analyze it is essential for the SDGs. Without record-keeping we cannot track nor prove progress on environmental and social matters.
Enhancing capacity-building support to developing countries to increase the availability of high-quality, timely and reliable data disaggregated by income, gender, age, race, ethnicity, migratory status, disability, geographic location and other characteristics relevant in national contexts is therefore a priority.
KIMPA's role in the SDGs
For the previous 16 SDGs, we have explored key figures regarding the issues they present and why they matter. The 17th SDG, however, is so broad it could potentially include all of them. Because of this, we wanted to focus, for this last article, on the role KIMPA can play towards achieving the SDGs.
As mentioned above, the SDGs are a series of objectives adopted by the United Nations but which in no way are exclusive to governments. On the contrary, they incentivize all spheres of society, from individuals to private companies, from NGOs to local communities, to engage in the path towards sustainable development.
At KIMPA, we advise entrepreneurial families to invest in assets and projects which have an intentional and measurable impact related to one or more of the SDGs while providing an attractive financial return. Through a range of services which you can know more about by contacting us, we seek to create a positive change in the world, in a visible and scalable way.
WHAT INVESTMENT SOLUTIONS EXIST TO CONTRIBUTE TO THIS SDG?
It is nowadays possible to demand more than a financial return adapted to a risk level from your investments. Impact investing is placing a third dimension at the core of your investment strategy: to have a positive impact on the world.
Regarding partnerships for the goals, the investment themes* are the following:
Financial system change
Building the impact ecosystem
Before moving forward with the presentation of investment solutions we have identified, we’d like to remind you that the ensuing presentation does not constitute a buy, sell, subscription or advice in financial investments offer from KIMPA. This presentation analyzes data and numbers without accompanying them with comments or value judgements regarding their worth for the reader. This article seeks to illustrate how an investor’s capital can contribution to solving global issues. The performance or numbers mentioned are estimates from asset managers communicated over a given time period and are therefore in no way a guarantee of the value of said investment in the future. If you wish to invest financially, please contact your financial advisor who will be able to guide you towards your objectives given your civil, fiscal, and asset situation while ensuring an adequate investment.
Financial system change
The traditional investment paradigm is still based on Modern Portfolio Theory, which takes into consideration risk and return but is inadequate to address major systemic issues as it does not take into account the 3rd dimension which is impact. Re-conceptualizing the financial system to integrate social and environmental impact into its core will lead to more accountability and sustainability reporting from companies, a more adequate pricing of externalities and incentives for a just financial system.
Terra Alpha Investments is an investment management firm which measures and integrates environmental productivity into the building of its portfolio. This means it takes into account carbon, water and material efficiency, energetic performance, and impacts on soil, forests and agriculture as criteria besides the traditional risk and return when investing in global public equities.
As a private equity option, Sinai Technologies is a San Francisco based company which provides software solutions for companies to monitor, price, analyze and trade their carbon emissions. The monitoring and analysis of greenhouse gases emissions is the first step towards their reduction.
Blended capital consists of funding projects through a combination of development finance, philanthropic and sub-commercial funds. By mixing public and private capital flows, the risk/return hurdles are lowered and innovative programs with high potential impact may be undertaken without compromising the economic returns. Impulsed by public institutions and programs such as the European Union's Horizon 2020, blended finance is a strategy for emerging and frontier market enterprises to attract capital from private investors. The creation and development of blended capital structures is essential for the achievement of all SDGs.
Building the impact ecosystem
Last but definitely not least, the development of the impact ecosystem is axiomatic to the achievement of the SDGs. As explained through our series of articles, impact investing seeks to bridge the gap between traditional investment which only aims for financial returns without considering the harm it may cause to people and the planet, and philanthropy which responds to specific issues without a concern for financial returns. Impact investors, however, seek to truly integrate the 3 dimensions that are risk, return and impact, understanding that real positive impact will come through financial returns which are attractive to investors, and vice-versa that financial returns can only be sustainable in the long term if they have positive externalities.
Finance remains one of the most scalable ways to have a positive impact on the world because it fosters innovation, entrepreneurship, and disruption.
BonVenture is a German impact venture capital fund working within the SDG framework. They invest equity, loans and mezzanine in impact-driven businesses in German speaking countries. The VC is currently managing several funds ranging between 5M€ and 40M€ and creating impact across all the SDGs by supporting startups, setting out clear targets of social and environmental impact, and measuring and analyzing the improvements.
AND NOW? If you want to become an impact investor, contact your financial advisors specialized in impact investing. They will be able to support you in measuring and connecting the three dimensions that are risk, return and impact, according to your property status and investor profile.