ESG 2.0: Investing in the Sustainable Development Goals

By December 26, 2017Impact Investing
sustainable-development-goals

According to Triple Pundit, 38% of Fortune 500 companies have publicly espoused alignment to the Sustainable Development Goals (SDGs).3 These companies are integrating SDG-thinking into business strategy.

Given that ESG investing and the Sustainable Development Goals both focus on the application of sustainability through business strategy, it seems reasonable to conclude that the next frontier of ESG investing could be a real focus on “SDG-related companies.”

The Sustainable Development Goals, also known as the “Global Goals” originated on September 25th 2015, with the aspiration to guide United Nations’ policy and unite the world to end poverty and protect the planet’s finite resources. The 17 goals, focused on poverty alleviation, environmental awareness, equality, diversity, transparency, and societal well-being, were built on the success of the Millennium Development Goals, and provide a 2030 global roadmap to a sustainable future.

 

 

The SDG’s are the cornerstone of the United Nations Development Programme (UNDP), guiding funding and policy decisions until 2030. The UNDP is the United Nation’s primary development agency, and is working to embed the SDG’s into national development plans, but the effort must expand beyond the United Nations alone.

Poverty eradication is at the heart of the 2030 Agenda, and so is the commitment to leave no-one behind. The Agenda offers a unique opportunity to put the whole world on a more prosperous and sustainable development path. In many ways, it reflects what UNDP (United Nations Development Programme) was created for.”

– Achim Steiner, UNDP Administrator 1

As stated on the UNDP website:

     “Achieving the SDGs requires the partnerships of governments, private sector, civil society, and citizens alike to make sure we leave a better planet for future generations.” 2

Are the Sustainability Development Goals the Next Frontier of Investing?

Sustainable development has been defined by the United Nations as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” Furthermore, the UN posits that in order for sustainable development to be achieved, environmental protection, economic growth, and social inclusion must be synchronized.

According to Triple Pundit, 38% of Fortune 500 companies have publicly espoused alignment to the Sustainable Development Goals.3 These companies, aspiring to walk the talk, are integrating SDG-thinking into business strategy.

Given that ESG investing and the Sustainable Development Goals both focus on the application of sustainability through business strategy, it seems reasonable to conclude that the next frontier of ESG investing should be a real focus on “SDG-related companies.”

One crucial piece of the SDG framework is mustering financial capital for sustainability. The World Economic Forum estimates that an annual investment of 3.9 USD trillion is needed through 2030,4 and according to RobecoSAM, an investment specialist focused solely on ESG investing, “The SDGs provide traditional donors the opportunity to be co-investors who can financially contribute to and profit from sustainable economic and social development.” 5

The rationale for embedding the SDGs into the investment process is that consideration of the Goals helps to lower capital costs for a company, and thereby makes them a better investment by lowering hurdle rates and ensuring the longevity of new projects and business models.

The SerenityShares Impact ETF index (NYSE: ICANNDX) witnessed 14% of its 115 holdings acquired resulting in over $136 billion in transactions.6

 

Ticker Closing Date Acquired Acquirer Amount 
1 CCP 9/20/2016 Care Capital Properties Sabra $7.4 billion
2 SCTY 11/21/2016 Solarcity Tesla $2.23 billion
3 EOCA 11/30/2016 EOCA Enel Americas SA $3.6 billion
4 AMSG 12/1/2016 AMSURG Envision Healthcare $7.8 billion
5 CLC 12/1/2016 Clarcor Parker Hannifin $4.3 billion
6 LNKD 12/9/2016 LinkedIn Microsoft $26.2 billion
7 TMH 2/6/2017 TeamHealth Blackstone $6.1 billion
8 LOCK 2/9/2017 Lifelock Symantec $2.3 billion
9 SCAI 3/29/2017 Surgical Care Affiliates UnitedHealth $2.3 billion
10 WWAV 3/31/2017 WhiteWave Foods Danone $12.5 billion
11 MJN 6/15/2017 Mead Johnson Nutrition Reckitt Benckiser Group $16.6 billion
12 WFM 8/2/2017 Whole Foods Amazon $13.7 billion
13 MBLY 8/8/2017 MobilEye Intel $15.0 billion
14 NORD 8/22/2017 NORD Anglia Education Canadian pension group $4.3 billion
15 WOOF 9/12/2017 VCA Inc. Mars Inc. $9.1 billion
16 WBMD 9/15/2017 WebMD KKR $2.8 billion

7

According to Scott Sacknoff, the CEO of SerenityShares, “this highlights the concept that companies with products and services targeting social and environmental challenges, like those of the UN Sustainable Development Goals and our SerenityShares 20, are in high demand. The common thread is that these firms operate in areas of increasing market demand—healthcare services; healthier natural foods; personal identification security, and advanced technology endeavors targeting education, renewable energy, and safety.”

Conclusion:

A world in which ESG investing and the Sustainable Development Goals are aligned is a world focused on targeted interventions for an optimistic future. A note to impact-oriented investors – it would be astute to look out for opportunities to invest in the Sustainable Development Goals, an anticipated trend coming to you soon!

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Gitterman Wealth Management
SMART (Sustainability Metrics Applied to Risk Tolerance)®
Sustainable, Impact, and ESG Investing Services
for Individuals and Financial Professionals

 

Gitterman Wealth Management is an industry leader in the Sustainable, Impact, and ESG (Environmental, Social, and Governance) Investing space.  For more information about our investing services for individuals, or our research, education, and investing services for financial professionals, please click on the above links, or visit
www.GittermanWealth.com and click on Sustainable Investing. 

 

[1] http://www.undp.org/content/undp/en/home/sustainable-development-goals.html

[2] http://www.undp.org/content/undp/en/home/sustainable-development-goals.html

[3] https://www.triplepundit.com/2017/10/exclusive-38-fortune-50-publicly-support-sustainable-development-goals/

[4] World Economic Forum “Blending public and private funds for sustainable development”, OECD Development Co-operation Report 2016

[5] https://www.robeco.com/media/e/4/c/e4c1ddf8e238421287ca43ea386688a0_advancing-sustainable-development-goals_tcm17-10395.pdf

[6] Sacknoff, Scott. “SerenityShares Impact ETF.” 13 Nov. 2017. Raw data.

[7] Sacknoff, Scott. “SerenityShares Impact ETF.” 13 Nov. 2017. Raw data.

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Author Jeff Gitterman

Jeff Gitterman is a co-founding partner of Gitterman Wealth Management, LLC, and a thought leader in the field of Sustainable, Impact, and ESG (Environmental, Social, and Governance) Investing. He is the creator of his firm’s SMART (Sustainability Metrics Applied to Risk Tolerance)® Investing Services, which offer investment opportunities for individual clients, as well as research and investing services for other financial professionals in the Sustainable, ESG, and Impact arenas.

Noted as an “ESG expert” by Financial Advisor magazine, Jeff has also been featured in the past in Money Magazine, Barron’s, Morningstar Magazine, The Wall Street Journal, CNN, and Affluent Magazine, among many others.

Jeff deeply believes that the migration of investor capital towards more Sustainable, Impact, and ESG investments is one of, if not the most effective way to help realize the United Nations’ Sustainable Development Goals (SDGs), and he is committed to helping both investors and other financial professionals navigate the rapidly growing Sustainable, Impact, and ESG Investing landscape.

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