How the UN Sustainable Development Goals Impact Your ESG Investments

The United Nations’ Sustainable Development Goals (SDGs) offer a comprehensive and universally accepted set of objectives that can guide investors and businesses in developing their Environmental, Social, and Governance (ESG) strategies.

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What are the Sustainable Development Goals (SDGs)?

The SDGs are a set of 17 global objectives established by the UN in 2015 as part of the 2030 Agenda for Sustainable Development. They aim to address a wide range of global challenges, including poverty, inequality, climate change, environmental degradation, peace, and justice. These goals, agreed upon by all 193 Member States, call for active participation from businesses of all sizes in achieving these objectives.

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To be exact, the 17 SDGs are:

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1. No poverty
2. Zero hunger
3. Good health and wellbeing
4. Quality Education
5. Gender equality
6. Clean water and sanitation
7. Affordable and clean energy
8. Decent work and economic growth
9. Industry, innovation and infrastructure
10. Reduced inequalities
11. Sustainable cities and economies
12. Responsible consumption and production
13. Climate action
14. Life below water
15. Life on land
16. Peace, justice and strong institutions
17. Partnership for the goals

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Integration of SDGs in ESG investing

In recent years, investors have been increasingly drawn to ESG strategies not only for their ethical implications but also for their potential to deliver long-term returns.

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How then does this relate to the UN’s SDGs?

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To keep up with the rising demand from investors exploring how to incorporate ESG strategies into their investment approach, many businesses have looked to expand upon their ESG practices and to provide more measurable targets.

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The SDGs provide a broader, more comprehensive framework for ESG mapping, helping to drive the adoption of sustainable investing and responsible corporate behaviour.

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Unlike traditional ESG approaches, which often focus on minimising negative impacts, the SDGs encourage businesses to make a proactive and measurable impact.

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In turn, as of February 2018, more than 40% of the G250 — the world’s largest 250 companies — have acknowledged the SDGs in their corporate reporting.

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Aligning ESG strategies with the SDGs

There are several advantages to aligning ESG strategies with the SDGs. These include:

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• Strengthened ESG Frameworks: The SDGs offer a new perspective on ESG issues, helping companies and investors establish a common language for decision-making. By connecting SDGs to existing ESG measures, businesses can address financially significant regulatory, operational, and ethical issues more effectively. This provides a clearer framework for assessing ESG criteria and informing an investor’s decision as to its suitability.
• Improved Data Transparency: One of the main challenges in ESG investing is the lack of standardised data and transparency, ultimately leading to greater ‘greenwashing’ across companies. The SDGs, many of which are quantitative, require companies to gather and report measurable data, improving the quality of ESG disclosures and making it easier for investors to assess genuine sustainability performance.
• Long-Term Value Creation: ESG-based investment decisions aim to create long-term value for both businesses and society, naturally aligning with the SDGs. In essence, the SDGs provide the “why,” while ESG provides the “how” — together, they offer a roadmap for sustainable and inclusive economic growth.

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Why does this matter?

The SDGs present a unique opportunity for businesses and investors to make a meaningful impact on a measurable scale. The aim of aligning ESG practices with the SDGs can improve transparency and provide greater clarity when defining what it means to invest in ESG.

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Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice.