How do we close the emerging market sustainable investment gap?

With the world dealing with the impact of COVID-19, progress towards the SDGs is at risk. However, now is the time for investors to seize the emerging market opportunity.

Despite representing huge
opportunities for
private-sector investment,
the SDGs might not be met

As economies around the world deal with the impact of COVID-19, achieving the Sustainable Development Goals (SDGs) hangs in the balance.

Without action from private investors, and resolution of some of the structural issues that are acting as a blocker on the flow of capital to emerging markets (including lack of transparency and legal certainty), it is unlikely that enough progress will be made. However, a fifth of investors are not even aware of the SDGs, rising to 44 per cent for small investment firms (those with assets under management of USD20 billion to USD90 billion).But in an investment environment where impact has become as important as returns, and SDGs aren’t just a noble ambition, they can become a strategic framework.

How do we encourage greater investor engagement with the SDGs?

_{^{Some of the SDGs can provide a compelling investment opportunity, and investors are starting to recognise this. Asset managers are beginning to use SDGs as a framework, and SDG-based language and metrics to quantify both performance and social impact.

But to an individual investor, the SDGs can feel abstract and the goals can just seem too big. Having structured conversations with investors on their areas of passion and how this links to the broader goals can help; we use our Impact Philosophy Framework to have conversations with clients about making an impact that aligns with the causes they are passionate about.}}

Eugenia Koh
^{Head, Sustainable Investment and Engagement Strategy, Private Bank and Wealth Management, Standard Chartered}

What is the role of banks in helping realise the potential of the SDGs?

There are four key ways in which banks can help accelerate sustainable finance. First, by advising clients and supporting the development of their transition to more sustainable business models. Second, by coming up with innovative products that provide a vehicle for sustainable finance whether that is sustainable deposits, green, transition, blue or gender bonds, or SDG aligned private equity financing. Third, by acting as a catalyst for sustainable financing, by deploying our own balance sheets and acting as a bridge for investors to move capital to where it is needed the most. And fourth by ‘walking the talk’ and demonstrating how we will make both our own operations and the activities we finance more sustainable.

Daniel Hanna
^{Global Head of Sustainable Finance, Standard Chartered}

_^POLL
Which of the following best describes your awareness of the SDGs?

I am familiar with the SDGs
I am somewhat familiar with the SDGs
I am not aware of the SDGs

COVID-19 and the green recovery

Will COVID-19 accelerate sustainable investment and bring us closer to achieving the SDGs as far as climate and the environment is concerned?

The answer is unclear. Almost three-quarters of investors (74 per cent) say that a green recovery – cutting CO2 emissions as part of a ‘build back better’ approach – is now a global priority. And 61 per cent say that the crisis has encouraged their own firm to direct investment towards a green recovery.

Yet 70 per cent believe the crisis has widened the capital gap between emerging and developed markets. This is concerning, if the crisis is causing emerging market investment to fall, progress towards the SDGs will be hampered despite investors’ aims to drive positive change.

How has COVID-19 impacted sustainable investment?

ESG and sustainability-themed investments have outperformed during this period. As a result, we are seeing even more interest in sustainable products, including from older investors who have previously been less engaged.

Now is the time to focus on putting the SDGs at the heart of investment strategies and making them relevant to mainstream investors.