Big challenges inspire big questions. And for the global investment community, one of the biggest questions is the subject of this study: how can investors drive sustainable development and help build a better future for the planet?
We spoke to asset managers with a combined USD50 trillion of assets under management (AUM) – equivalent to more than half of global GDP – in search of the answer.
Climate change, poverty and now COVID-19 remind us that global problems require global solutions that involve the entire financial ecosystem – from fund managers to the banks that facilitate and catalyse sustainable capital.
The scale and speed of investment to tackle international challenges, particularly in emerging markets, will affect the lives of everyone, and this report reveals just how urgent it has become. Almost three quarters of investors believe that the pandemic has widened the capital gap between emerging and developed markets. Ambitious initiatives such as the UN Sustainable Development Goals (SDGs) are more vital than ever, and the clock is ticking.
Investors want their funds to have a positive impact as well as providing healthy returns. Sustainable emerging market investment is the key to both.
As the economies furthest from reaching the SDG targets, emerging markets are where investment can have the greatest impact. Yet, with the UN’s 2030 deadline less than a decade away, investment in the SDGs in these economies is still short by trillions of dollars. For example, looking at our $50 Trillion Investor Panel’s investment in SDG 7 (affordable, reliable and sustainable energy for all), there’s a gap of USD3.5 trillion to reach the private-sector investment required over the next decade. This means that – unless we act now – this important goal will not be achieved by 2030.
Our research shows that global investors are generally underinvested in emerging markets, with at least two-thirds of their AUM currently invested in developed markets. Risks in emerging-market investment is cited by the majority as a barrier. On the other hand, our research reveals that almost nine out of 10 global investors have seen their emerging-market investments match or outperform those in developed markets.
Much progress has been made in recent years to realise the SDGs, but this study makes clear the need to move faster. A seismic, unprecedented surge in private-sector investment – alongside public investment and commitments – will be required to bridge the gap and hit the 2030 SDG targets.
There is no single answer to The $50 Trillion Question, but it is evident that investors need to expand their focus beyond developed markets. Emerging economies offer investors a unique opportunity: strong returns combined with the chance to have a significant, positive impact. Now is the time to seize it.
Simon Cooper CEO, Corporate, Commercial and Institutional Banking
