Can a ‘snowball effect’ among impact investors rescue floundering SDGs?

It has not been a good year for progress on the Sustainable Development Goals, but those charged with mobilising more private capital for good see signs of hope.

Many emerging markets, for instance, want to “leapfrog” more developed economies when it comes to enabling impact investing, according to the UN official responsible for driving more investment into the SDGs.

Elizabeth Boggs Davidsen, director of the UN Development Programme’s SDG Impact, said some governments in Africa and Latin America “that haven’t been really immersed in the impact conversation... genuinely would like to leapfrog”, by jumping straight to best practices, for example by implementing SDG-enabling investment guidance.

Established in 2018 as a startup within UNDP, SDG Impact aims to address the barriers to investment in areas that contribute to the SDGs. It is developing tools including impact standards for different asset classes; investor maps, which provide country-level data on investment opportunities that directly align with the SDGs; and an impact assurance mark or ‘seal’, awarded by a third-party certifier to those meeting the standards.

Governments that haven’t been really immersed in the impact conversation... genuinely would like to leapfrog

While SDG Impact had developed its market intelligence and standards with investors in mind, these tools had sparked interest among governments and others, according to Boggs Davidsen, speaking in a session on Tuesday during Social Value Matters conference. Asset owners, for instance, were thinking of using the standards to frame their investment guidelines and to identify questions to ask of funds.

Social Value Matters is the annual conference from the Social Value International network, this year convened by Social Value Canada.

 

SDGs: progress in reverse

Elizabeth Boggs DavidsenThe 17 SDGs, which were agreed in 2015 with a 15-year timeline, face particular pressure this year.

“This is the first year in 30 years that human development progress is in reverse, and millions of people are falling into extreme poverty,” said Boggs Davidsen (pictured), who also cited eroding public trust, financial instability and deepening inequalities. “Things aren’t going great.” 

A report from the Bill and Melinda Gates Foundation released last month showed regression on the majority of SDGs in 2020. On vaccine coverage, a useful indicator for the functioning of health systems generally, progress has “been set back about 25 years in about 25 weeks”.

This is the first year in 30 years that human development progress is in reverse, and millions are falling into extreme poverty

But the financing gap existed pre-Covid, Boggs Davidsen said. Despite the huge increase in aggregate global wealth, this “wasn’t really moving in a sufficient scale towards financing the SDGs”.  

An estimated $5-$7tn needs to be spent annually to achieve the goals by 2030. There is an investment shortfall of around $2.5tn per year in developing countries – which could provide private sector investment opportunities worth $1tn-$2n a year.

“Business investors are so critical to building a more sustainable future. We just can’t achieve these goals without figuring out ways to unlock and enable more capital to flow towards the SDGs.”

 

 

‘Unsexy’ tools

One of the solutions SDG Impact proposes is its investor maps, expected to cover 25 countries by next year. Boggs Davidsen acknowledged they were “not that sexy”: they simply translate data already collected by various UN bodies into something investors can use. But that made them relatively cheap to produce, and promoting opportunities that genuinely reflect development policy priorities “could have a snowball effect”, she said, given current levels of interest in the data. 

SDG Impact’s standards help users to put high-level principles into action – and to continuously assess whether they’re meeting them. These will be developed for bond issuers and enterprises; the first, for private equity funds, is expected to be released in the coming days.

We cannot afford for one moment to be accepting a level of impact which is not constantly getting higher - Jeremy Nicholls

Jeremy Nicholls – who in 2007 founded the SROI Network, the predecessor of the Social Value International network – said he considered “any move towards decision-making [as] excellent”.

“There has been a problem where people have been focused on some kind of measurement – so that they can say, ‘We have contributed to the SDGs, we have had an impact’.

“But that doesn't not necessarily say whether that is as high as it could be and what kind of decisions they’re making to increase it from whatever level it was.” 

The current climate made continuous improvement urgent. “We cannot afford for one moment to be accepting a level of impact which is not constantly getting higher,” Nicholls said.

Pioneers Post is a media partner of Social Value Matters, which runs all week. Follow all our coverage here

Header image by UN Ukraine, reproduced here under Creative Commons licence

 

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