A deepening relationship between impact investing and the SDGs

BUENOS AIRES — There may be a shift underway in the impact investing sector to increasingly link it to the achievement of the Sustainable Development Goals, if the conversation at this week’s Global Steering Group for Impact Investment’s annual summit is any indication.

From GSG chairman Ronald Cohen’s opening remarks, through many of the speeches, panels, and conversations, the SDGs kept getting mentioned — a marked difference from the summit a year ago.

“The SDGs have galvanized a tremendous amount and a growing amount of private sector capital,” Michele Giddens, co-CEO at Bridges Fund Management, and a non-executive director on the board of the CDC Group, told Devex. “They’ve done that in part because investors were looking for some kind of objectivity about the question ‘What is impact?’ And the SDGs do give a roadmap.”

Bridges uses the SDGs to source business opportunities, and CDC is incorporating them into the development impact thesis of every new investment, she said.

“The idea of coherence, consistency gives them an importance, and the urgency of the 10-year framework is great a source of focus for impact investors and DFIs alike,” Giddens said.

An announcement at the summit was illustrative of this trend, with GSG and the United Nations Development Programme signing a memorandum of understanding outlining how the two organizations will work together moving forward.

UNDP will help GSG launch impact investing national advisory boards in up to eight countries, and GSG will help UNDP to create SDG investor maps, which help outline SDG-aligned investment opportunities based on country priorities and needs. GSG has networks of investors and private companies that can play an important role in developing and verifying the investment maps and help UNDP drive adoption of global standards, said Elizabeth Boggs Davidsen, director of UNDP’s SDG Impact program.

“It’s really helpful for the impact investment community to align, and to support, and to identify as the SDG-enabling community because it automatically takes away any preconceptions someone might have that this is a niche, small asset class,” she told Devex in an interview.

The shift to greater SDG alignment is coming now because UNDP and others are realizing that impact investing is critical in trying to fill the SDG financing gap, GSG chairman Cohen told Devex. The other part is that the impact investing market has progressed to a point where it’s ready to scale, he added.

Harvard Business School is working on creating a framework for impact-weighted accounts, which would be line items on financial statements outlining the positive and negative impacts of a company on employees, customers, the environment and society. If adopted, this could allow investors and financial managers to make decisions based not solely on a company’s financial record but their impact as well. If impact-weighted accounts are adopted, it would allow for the trillions of dollars invested in public companies to begin to measure impact and link it to the SDGs, which is what Harvard and GSG are trying to do, Cohen said. With that kind of tool “the ability to fill the gap becomes real,” he said.

Today more than 60% of the impact investors surveyed by the Global Impact Investing Network for their annual industry survey report that they are tracking performance to the SDGs. And Amit Bhatia, CEO at GSG, told Devex he expects the connection and the use of the SDGs as a framework for building impact economies to be an even greater focus in the year ahead.

Editor’s note: The Global Steering Group for Impact Investment facilitated Devex's travel for this reporting. However, Devex maintains full editorial control of the content.