The World's To-Do List Is A Huge Investment Opportunity
A plan without a goal is just a wish. Accomplishing anything worthwhile takes a viable plan and an outline of the steps needed to get there. That’s why in 2015 the UN announced the 17 UN Sustainable Development Goals: the steps needed to protect the planet, ensure prosperity and end poverty by 2030.
The goals represent the “world’s to-do list.” There aren’t many things that 193 world leaders can agree on, but the UN SDGs are an exception with the entire UN General Assembly adopting the goals.
So why do the SDGs represent an investment opportunity? Because government alone won’t be able to solve them, and the private companies that step up stand to outperform in the long run.
(See also: What Are The Sustainable Development Goals? Why Do They Matter?)
For the private sector, aligning with the global goals presents a $12 trillion market opportunity by 2030. For example, achieving UN SDG 3 (Good Health and Well-Being) will require innovations in wearable healthcare tech that allows medical staff to easily monitor patients from home. Achieving UN SDG 7 (Affordable and Clean Energy) will require innovations in solar and wind technologies so that they are accessible for all consumers.
We often think of government as taking the lead in addressing global challenges, but achieving these goals will take “multi-stakeholder partnerships,” blending the efforts of governments, the private sector and civil society. Terri Toyota, Head of Sustainable Development at the World Economic Forum said, “collaboration for the SDGs isn’t a nice to have, it’s an imperative. We need everyone: businesses and private investors must join with local stakeholders, governments, philanthropists, and experts.”
Given the size of this market opportunity, it’s no wonder that more than a quarter of impact investors had tracked some or all of the $113 billion that they manage to the SDGs just a year after they were announced.
We still have a long way to go, but we’re already seeing private industry align with the UN SDGs. In 2017, 30% of businesses reported using the SDGs to set corporate objectives, a number that nearly doubled from 17% in 2016.
And it’s not just optics, it’s good business. Think about the risks involved if we don’t meet the UN Sustainable Development Goals. If private industries don’t align toward a positive future, lagging healthcare and education will impact their workforces. Environmental pressures will create political instability that affects the bottom line. There is no option other than to innovate.
And if that weren’t enough, government dedication to the global goals creates risks for businesses that don’t get on board. Entire industries will be held responsible for their true effect on society. One example lies in California’s regulations around reducing greenhouse gases.
By some estimates, there will be as many electric vehicles as smartphones in California by 2040. Investors that recognize that trend and align to it stand to outperform as electric vehicle manufacturers and the companies that make their component parts ramp up production to meet the increased demand. The automotive companies that don’t align to these government efforts stand to lose out on the momentum happening in what is now the fifth largest economy in the world.
Alignment with the UN SDGs and investing in impact are unique when coupled; they represent a herculean effort that will bear similarly huge results. Tackling the world’s greatest challenges requires the cooperation of everyone – from philanthropies and nonprofits to governments and the private sector – and investors are no exception. (Continue reading: The Impact Investing Imperative for Advisors)
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