Earlier this fall we talked about the Sustainable Development Goals (SDGs)—a collective action agenda that offers a coordinated approach to ending global poverty. We were particularly inspired by the strong examples of SDGs providing a unifying framework for corporations to double-down on integrating impact. But corporations are not the only group of actors finding alignment across the SDGs. Some impact investors—a community that continues to grow in size and scope—are already there.
Since the SDGs were formalized in 2015, we’ve seen impact investors reframe their thinking across both measurement and the development of new products. And the data supports this with the latest Global Impact Investing Network (GIIN) Annual Survey reporting 26 percent of the investors surveyed already track performance of their investments to the SDGs. An additional 34 percent plan to do so in the future—this will represent more than half of the active respondents already engaged in Impact Investing. Of the respondents who participated, many cited easier communication of impact (78 percent) and alignment with global development structures (75 percent) as key strengths of using SDG-aligned language.
Advancements in Standards and Frameworks
Standardization around how we invest in—and measure—the SDGs will be critical to truly meeting the Goals. Establishing a coherent set of frameworks that guide investors on “how” will also help us speak the same language. This year alone we’ve seen a thoughtful emergence of some of these SDG-aligned frameworks. Many allow investors and companies to measure how their investments and enterprise activity contribute to “achieving” the SDGs. Different approaches to measuring and integrating the SDGs are a positive sign that they could become best practice around how the sector designs for impact:
- SDG Compass developed by GRI, the UN Global Compact and the World Business Council for Sustainable Development (WBCSD) provides company-level guidance on measuring and managing the effect and contribution of companies toward the SDGs
- Toniic—a global action community for impact investors – released a framework earlier this year to allow their investor community to align their investments with the SDGs. These framing facilitated better identification of synergies across global investment opportunities
- The MSCI ACWI Sustainable Impact Index works across the public markets to consolidate the 17 Goals into five investible themes – basic needs, empowerment, climate change, natural capital and governance. The Index identifies companies that derive at least 50 percent of their revenue from products and services that address environmental and social challenges within these themes, and weights them accordingly.
Innovations in Products and Processes
Impact investors are also leading in other ways, experimenting with actual integration of the SDGs into their decision-making process. For these investors and managers, the SDGs offer guidelines on how they make decisions, the investments they select, the companies they support and how to measure that impact:
- Encourage Capital, an emerging market-based private equity fund manager has identified five impact objectives all closely aligned with the SGDs—financial inclusion, climate change, sustainable infrastructure, sustainable seafood and water conservation. According to a GIIN Report on the SDGs, Encourage uses the SDGs to “ground the impact outcomes that might be more difficult to conceptualize.”
- Sonen Capital, a multi-strategy impact investing manager framed its 2015 Annual Report around how its investment strategies link to the SDGs. According to the firm, the SDGS could be good for business, serving as a “compass” to ensure investments can be measured in their contribution to the Goals.
- PGGM, the second largest pension fund in the Netherlands, modified their investment strategy to include “Sustainable Development Investments (SDIs)”. These investments must fulfill regular risk return requirements, while providing a substantial and measurable contribution to one or more SDGs. Aligning across six of the SDGs, PGGM focuses on climate change mitigation, water, food, and health.
The above are only a handful of the innovative experiments and commitments on the part of impact investors to make the SDGs a part of how we invest and what we measure.
To truly end global poverty and achieve the Goals, we’ll need many different folks around the table. Creating a common language for all actors is critical and we should continue to commit to learning from those who are experimenting. We hope that the development of measurement frameworks, investment products and ecosystem building will only increase over time. To facilitate doing that the right way, creating synergy across how we talk about the Goals will take us one step closer to effectively channeling capital to solve our most pressing challenges.
With thanks to Mai Nguyen (Social Innovation Intern at the Case Foundation) for her support in researching this piece.