Goals for the World Greg Readings greadings@arlingclose.com

Environmental, Social and Governance – or ‘ESG’ – issues are unsurprisingly a hot topic in the investment industry, with many diverse themes being explored in ever more detail. It is a broad, complicated and nuanced area with little in the way of official standardisation of approach. One common thread that investors may have noticed appearing in some asset manager and counterparty material is a set of colourful, numbered squares featuring white pictograms. These are the symbols used to represent the United Nations’ Sustainable Development Goals (SDGs). Phrases such as “aligned with the SDGs” are used to describe portfolios or individual investments which aim (or indeed claim) to be contributing towards these goals. So what exactly are they?

In 2015 the global community, via the United Nations, agreed on 17 Sustainable Development Goals, encompassing 169 targets. ‘Sustainable development’ is defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs and the SDGs are a rallying cry to end poverty, protect the planet and improve the lives and prospects of everyone by 2030. The goals are not legally binding but rather a voluntary framework to help set a common blueprint for achieving a better world for all. The goals and targets adopted by UN member states fall under the following:

  1. No Poverty: End poverty in all its forms everywhere
  2. Zero Hunger
  3. Good Health and Well-being: Ensure healthy lives and promote well-being for all at all ages
  4. Quality Education
  5. Gender Equality: Achieve gender equality and empower all women and girls
  6. Clean Water and Sanitation: Ensure access to water and sanitation for all
  7. Affordable and Clean Energy: Ensure access to affordable, reliable, sustainable and modern energy
  8. Decent Work and Economic Growth: Promote inclusive and sustainable economic growth, employment and decent work for all
  9. Industry, Innovation and Infrastructure: Build resilient infrastructure, promote sustainable industrialisation and foster innovation
  10. Reducing Inequality: Reduce inequality within and among countries
  11. Sustainable Cities and Communities: Make cities inclusive, safe, resilient and sustainable
  12. Responsible Consumption and Production: Ensure sustainable consumption and production patterns
  13. Climate Action: Take urgent action to combat climate change and its impacts
  14. Life Below Water: Conserve and sustainably use the oceans, seas and marine resources
  15. Life On Land: Sustainably manage forests, combat desertification, halt and reverse land degradation, halt biodiversity loss
  16. Peace, Justice, and Strong Institutions: Promote just, peaceful and inclusive societies
  17. Partnerships for the Goals: Revitalise the global partnership for sustainable development

Achieving these goals is of course not a simple task and much lies in the hands of governments and strategies implemented at a country level. However, with an estimated $5-7 trillion of investment needed per year, private finance will need to play a key role if the goals are to be met – and the UN estimates the funding gap is widening.

At the moment it is the area of impact investing - explicitly looking to make additional, measurable, positive environmental/social impacts as well as a financial return - which most often references the SDG framework. Given the SDG agenda provides a common reference point for thinking about issues of sustainability, and it is generally accepted that this is key to long-term outcomes, both societal and financial, it is likely to become further embedded into investment thought-processes. Challenges remain with issues such as the meaningful measurement of real-world outcomes and data provision more generally, so it is a work-in-progress but one which the investment community is increasingly engaged with.

For our client’s treasury management strategies, which are mainly focused on security and liquidity, a broad and meaningful link to the SDGs is not necessarily easily defined. However, CIPFA’s current Treasury Management Code of Practice consultation includes proposals for ESG risk management by public sector bodies – the SDGs may not feature formally but they are part of the wider context and debate which continues to evolve, and which investors will want to keep informed of. If you would like to discuss ESG-related issues then please get in touch.