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SDGs as Improvement over ESG Framework.

SDGs as Improvement over ESG Framework

An asset management company has proposed a framework to make sustainable development goals more sustainable by facilitating links between investment owners and institutional investors with sustainable development goals. The report argues that the SDGs provide a “powerful framework” for directing structured investment towards long-term financial value and impact as part of a global transition to an “impact economy”.

17 Asset Management (17 AM) is a global asset management company whose mission is to align clients’ financial goals with the advancement of sustainability goals. It designs, implements and manages investments and specializes in hybrid financing and another innovative financing convinced that the achievement of objectives “will generate superior returns over the long term, while also contributing to an economically prosperous, respectful world. environment and more inclusive. “

The report “Institutional Intentionality: Aligning Institutional Investors with the Global Agenda for the SDGs” aims to translate the SDGs into a “feasible investment strategy that incorporates the motivations and constraints of asset owners and institutional investors”. The authors argue that the SDGs can help institutional investors move from a “cause-to-nothing” investment approach to one that focuses on long-term value creation through structured investments that will support impact on long-term development.

The report notes that the existing Environmental, Social and Governance (ESG) Framework provides investors with minimal guidance, while investment in the Sustainable Development Goals provides more “guidance and intentionality”, given the standardization of sustainable development goals and wording of impact domains, as well as global indicators, which offer investors the opportunity to monitor and compare progress. The report also indicates that SDG investments can lead to better improvements in social ROI and therefore better financial return.

The report presents a process for developing an investment strategy aligned with the Sustainable Development Goals. At the planning stage, for example, the report recommends integrating SDG mandates with the objectives, investment guidelines and restrictions of a fund to explain how the alignment of the SDGs can support financial performance. and guide SDG solutions at the system level. During execution, the results of the sustainable development objectives identified during the planning phase can inform due diligence and portfolio selection processes, while helping to identify fund managers familiar with SDG’s investments. . The report provides examples of how other institutional investments have adopted impact investment strategies and managed risk.

The report also highlights early users of SDG investments, including endowments, insurance companies, pension funds, and sovereign wealth funds. For example, endowments and foundations hold $ 1.4 trillion in combined assets. The intentional endowment network is an example of pioneering investments in sustainable development goals. The network helps to design endowment funds to “make a significant and crucial contribution to the creation of a healthy, just and sustainable society” and has developed a strategy to align endowment funds with the SDGs and the Paris Agreement on climate change.

Another example is Aviva, a UK insurance group, “a strong advocate for sustainable development goals”. Aviva invests in the health and well-being of people and the economy as a whole, and tackles issues ranging from climate change to an aging population. Two Dutch pension funds, APG and PGGM, have developed an SDG-mapped decision tree to identify sustainable development investments that meet financial risk and return requirements while promoting a positive social and environmental impact. . APG and PGGM have released the decision tree to help others make capital allocation decisions consistent with the SDGs.

The report concludes by highlighting the “tremendous power” of institutional asset holders to change development pathways, contribute to building a fair and sustainable future, and achieving the SDGs.

Source: SDG Knowledge Hub.