Yes, the UN Sustainable Development Goals Are Sexy
The United Nations Sustainable Development Goals are not only positive aspirations for the world, they can be a roadmap to significant profits for investors.
If you are most people, you hear the words “United Nations Sustainable Development Goals” and your eyes start rolling back in your head. Sounds like something a bunch of people spend hours talking into microphones about and maybe something governments are supposed to be working on, but nothing to do with you as an investor.
But you are oh so wrong.
The UN Sustainable Development Goals (UNSDGs), ratified in 2015 by UN member states, are cool. Sexy even. Why? They provide a globally vetted roadmap to impactful business and investment opportunities. There are 17 SDGs and 169 associated targets that aim to address challenges ranging from poverty to climate change to health and well-being.
Business is fundamentally about solving problems and creating opportunities. When it solves big problems or creates new opportunities for a lot of people, it does really, really well.
The UNSDGs are the yellow brick road for smart investors. The series of targets associated with each SDG can illuminate investment opportunities and investors such as Alliance Bernstein and HSBC have done just that.
According to Alliance Bernstein, the SDGs require about $90 trillion of investment over 15 years, which represents a major long-term growth opportunity for companies that can help provide relevant solutions. In response, the company has developed an AB Thematic Fund based on the SDGs which focuses on climate, health and empowerment and includes 30–60 stocks picked through a risk and return matrix.
In 2017, HSBC announced a $1 billion SDG bond (maturing in 2023) which has been investing in projects such as green building, social housing and water infrastructure. It was oversubscribed, by the way.
The 2017 report Better Business, Better World developed by the Business and Sustainable Development Commission quantified the imperative for business engagement. This report identified $12 trillion of business opportunities and 380 million jobs that could be created if just four of the SDGs are achieved.These opportunities were in food and agriculture, cities, energy and materials, and health and well-being.
Let’s take a quick look at cities, since you probably live in or near one: By 2030, 60 percent of the world’s population will live in cities, so ensuring that cities are sustainable and inclusive is critical not just to the realization of the SDGs, but more important, the future of our planet and our population. The SDG investment opportunity in cities is estimated to be worth $3.7 trillion.
According to the report, the largest business opportunities in cities relate to mobility solutions (public transportation, electric/hybrid vehicles and fuel efficiency), the built environment (affordable housing, energy efficiency and smart building technology), water and sanitation, and the so-called sharing economy (office space, car sharing). For the United States and Canada, the top three opportunities are energy efficiency in buildings, affordable housing, and electric and hybrid vehicles. In addition, there are opportunities relevant to cities in other major sectors that the Better Business, Better World report analyzed, including urban agriculture, reduced food waste, expansion of renewable energy and storage, and improvements in healthcare delivery models. Resiliency to climate change will be another critical SDG and business opportunity for many cities.
A recent comprehensive study from the Copenhagen Consensus Center found that investing equally across all 169 individual SDG targets would yield $7 in societal benefits for every dollar invested. Focusing on the targets with the highest-expected social payback could boost that return on investment fourfold.
Many investors have begun to map their current investments against the UNSDGs. But for those investors who want the yellow brick road to take them to the Emerald City, the key will be to study the 169 targets in the SDGs, prioritize areas of personal interest and expertise, and look for companies that have strategies that can solve for a specific SDG opportunity, say, to dramatically reduce food waste. Some 40 percent of food is wasted today while much of the world goes to bed hungry. Imagine if you could fix that problem and make money? How cool is that!