How to use the UN Sustainable Development Goals in an investment portfolio
The UN Sustainable Development Goals act as a “blueprint to achieve a better and more sustainable...
If the last sixteen weeks have taught us anything, it’s that the UN’s Sustainable Development Goals can only be achieved if we have strong global partnerships and cooperation. And a successful development agenda requires inclusive partnerships — at the global, regional, national, and local levels — built upon a shared vision and shared goals placing people and the planet at the centre. Strong international cooperation is needed now more than ever to ensure that countries have the means to recover from the pandemic, build back better, and we reach the targets set by the Sustainable Development Goals.
“Alone we can do so little; together we can do so much.” — Helen Keller, author
The aim of the UN’s Sustainable Development Goal #17 is to strengthen the means of implementation and revitalise the Global Partnership for Sustainable Development. Its nineteen targets include everything from improving domestic capacity for tax and other revenue collection, to the implementation of investment promotion regimes for the least developed countries and enhancing global macroeconomic stability.
According to the World Bank, 1.7 billion people – a third of the adult population – are still excluded from the formal financial system*. Financial exclusion is greatest among poor people and in emerging and developing countries. This hampers people’s ability to earn, protect themselves in times of crisis, and to build for the future. Affordable access to, and use of, financial services helps families and small business owners generate income, manage irregular cash flow, invest in opportunities, and work their way out of poverty.
Around the world, more attention than ever is being paid to the ways access to financial services accelerates progress toward development. This has spurred a wave of commitments by governments, international agencies, the private sector, and others to make the vision of financial inclusion a reality.
The envisioned financial inclusion goes beyond just having access or usage to financial services but has a strong focus on quality, meaning that financial services are responsive and responsible, meeting customers’ needs and capacities, as well as being safe and customer friendly.
Women’s financial inclusion will also be a keystone issue over the next decade, as the world looks to close the gender gap. Serving the women’s market represents an incredible opportunity from a business perspective, as well as helping to empower them.
Foreign direct investment has fallen by 40% from $1.5 trillion in 2019 to less than $1 trillion** for the first time since 2005, undoing the already lacklustre growth in international investment over the past decade.
While countries are accountable for their progress, the private sector holds the key to unlocking the world’s ability to deliver on the goals.
The investment opportunity in India’s banking sector is a great example. One of prime minister Modi’s earliest initiatives, for example, was to give everyone a bank account, providing access to banking services for the first time to nearly half the country’s population.
Goldman Sachs India Equity Portfolio currently has 22.3%*** of the fund invested in financials companies, including four banks among its largest ten holdings***.
Meanwhile, the Alquity Indian Subcontinent fund has a unique approach to financial inclusion in that the 10% of the fund’s fees are donated to projects in India through the Alquity Foundation. So far, it has awarded over $2 million to help transform more than 65,000 lives. One of those projects is called Phool — Hindi for flower.
Manager Mike Sell told me more about the project that employs women from the lowest castes to collect used flowers from temples, that would otherwise pollute rivers when discarded by the temples and recycle them into incense sticks. “We also run consumer panels with some of these women to help us understand their priorities, concerns and how they make spending decisions,” he said.
This marriage of environmental and social is a perfect example for what it means to be a Partnership to the goals. The SDGs have the potential to deliver value to not only impact investments that use the goals as a framework but also wider ESG-focused strategies that can benefit from the opportunity to accelerate the global transition towards the goals.
To highlight this range of potential, FundCalibre has launched its ESG rankings – a thorough assessment of each Elite Rated and Radar fund labelled as either ESG ‘Explicit’, ESG ‘Integrated’ or ESG ‘Limited’. One example is Janus Henderson, where ESG practices are fundamental to the company’s long-term engagement practices but varies across offerings. The Janus Henderson UK Responsible Income, Janus Henderson European Smaller Companies and Janus Henderson Absolute Return fund all range from Explicit to Limited, with an overarching emphasis on environmental and social concerns.
*Source: World Bank, Financial Inclusion
**Source: UN Sustainable Development Goals, 2021 Report
***Source: fund factsheet, 30 April 2022