Since the Sustainable Development Goals (SDGs) were agreed by global governments in 2015, the finance sector has shown a surprising level of interest in using the targets and indicators as an impact framework.
The SDGs, like most United Nations (UN) initiatives, targets nation states and governments. But it soon became clear that these issues would need everyone’s support, and also, that there are some compelling investment themes behind the coloured squares of the 17 development goals.
While investors are good at valuing a business opportunity, they’re not as good at identifying the key development issues within a country, and this is where SDG Impact comes in.
The organisation is part of the United Nations Development Programme’s (UNDP) Finance Sector Hub, which is a recent development for the UNDP as it engages more closely with the private sector. Fabienne Michaux is Director of SDG Impact, and she knows well the challenges of balancing investment priorities with impact outcomes.
“It’s looking at that opportunity to bring together different parts of the ecosystem and different actors to work together collaboratively towards finding solutions to the Sustainable Development Goals.” she says.
SDG Impact Maps
While investors may have plenty of good intentions, as well as investment capital ready to deploy, they often don’t have the requisite insight into the impact needs of particular countries or regions. They tend to simply invest in areas in which they’re familiar, which rarely maximises the impact potential in a particular region.
The SDG Impact Maps is an initiative developed by Fabienne and her team to bridge the divide between investors and beneficiaries on the ground.
“Yeah, I think the maps are fantastic. And I think part of what UNDP is trying to do is look at what its particular strengths and value proposition are, not looking really to replicate what other people are doing, but really trying to use the resources it has to provide something that fills gaps in the current market infrastructure. And of course, UNDP has presence in over 170 countries worldwide, and the maps are really looking to try and leverage that footprint and what UNDP does well, and the relationships that it has, really to bring a different perspective and lens to where those needs are.” Fabienne explains.
“It really brings together where there’s SDG need in a country with policy priority, that then will effectively create that nexus for private sector investment where there is an investable opportunity.”
Once you experience the platform itself, and get a feel for the depth of the data, and the way it’s presented, you’ll appreciate the huge amount of work that’s gone into it. They working through countries one at a time, with the number of investable projects growing steadily.
“At the moment, on the SDG Investor Platform, which anyone can go on and have a play with, we have maps from 13 countries. We’re in the process of completing further 25 maps, including seven maps around the ASEAN region. So the countries we have so far are: Armenia, Brazil, Colombia, Ghana, India, Kenya, Namibia, Nigeria, Paraguay, Rwanda, South Africa, Turkey, and Uganda.” Fabienne explains.
It uses the depth of the UNDP’s knowledge and experience of a region to identify a set of high-impact projects. They’re focussed on development needs, and highlight potential impact outcomes.
“The data starts with the UNDP’s relationships on the ground. A lot of it comes from public sector sources. So we need to actually be working in concert with public sector actors to access that data, but we also consult with private sector actors to actually identify, what are the investable business models, what is the return profile and investment characteristics, that would be achievable in certain areas? And obviously, it’s asking, what’s the nature of the impact that can be created and the need that’s being filled by looking at those particular areas?”
It’s important to note that the platform only offers information and insight, not deals.
“What the maps don’t do is give you a list of deals, it’s very much looking at where the investable opportunity areas are and what the types of business models are, that would lead to an investable return profile for private sector investors.” Fabienne says.
SDG Impact Standards
With more companies and investors engaging with the SDG’s, and with impact investing pushing into the mainstream, SDG Impact recognised the need for a framework that offered best-practice guidance on decision-making around contributions to the SDGs.
The organisation was uniquely suited to building a framework that would bridge the needs of the development sector, while also speaking the language of finance.
The SDG Impact Standards offer specific practices for organisations looking to target the SDGs with their operations or their investments. So far there are four sets of standards, three target the private sector, covering:
- Private Equity
- Bond issuers
While a fourth covers OECD donor countries and their private sector partners.
And while the world of impact investing certainly has its fair share of frameworks and operating models, Fabienne explains that these standards are designed to complement what already exists.
“The standards have been designed to be the overarching, organising framework for all of those frameworks. The development of the standard looked at the high level principles that were in place, things like the IFC Operating Principles, the UNEPFI principles for positive impact finance, UNGC has principles for integrated SDG financing for CFOs. So we looked at all of those frameworks and started there, and really wanted to make the standards compatible with all of those high level principles, but also worked hard to identify where the gaps were.”
The progress being on impact investing, and on businesses embracing sustainability, needs to be guided by a set of principles that can better navigate these good intentions towards genuine impact on the SDGs.
“We’re at an interesting time in history, I think there’s a lot of trends; like climate change, what we’re going through with the pandemic, population growth, and rising inequality, they’re all leading to a tipping point where sustainability and contributing positively to sustainable development outcomes is becoming more important in terms of opportunities, and certainly in terms of managing risks.” Fabienne says.
“The shift we need to see is a shift from the SDGs, being an add on to what business gets done to being how our business gets done. We think this is the way forward for all decisions, not just in the impact investing field, but how all organisations should be approaching decision making, and how all investors should be thinking about the investments they make. So we’re very keen to see this progress beyond just the impact investing sphere to start being integrated more centrally, in mainstream private sector decision making.”
The full audio of the conversation, between Fabienne Michaux and John Treadgold, can be found on the Good Future Podcast.