Emerging trends from the UN Global Compact Leaders Summit

The UN Global Compact 2021 Leaders Summit was a 26-hour virtual marathon bringing together global business leaders and partners to create a sustainable and socially responsible world. A range of new announcements was made, and programs were launched. The new UN Global Compact Strategic Plan was released for “bold and rapid progress to boost business action,” according to Sanda Ojiambo, CEO and executive director at the UN Global Compact.

A framework for action on Sustainable Development Goal 16 focuses on improving practices for corporate governance. An anti-corruption collective action playbook will fight against entrenched corruption. And a new report on climate action sets bold targets for businesses.

For the private sector and investors, in particular, the summit showed the impact of the COVID-19 pandemic. In the need to build back better and create a more resilient society, sustainability, biodiversity, gender, and diversity are part of growing investment conversations.

“There has been tremendous growth in sustainable linked instruments in the capital market and tremendous change in companies incorporating sustainability in their ongoing reports and aligning strategy,” Scott Mather, chief information officer at U.S. Core Strategies at PIMCO, explained in a discussion with members of the CFO Taskforce for the SDGs. He predicted it was set to become a “multi-trillion asset class” in the next couple of years.

“More and more investors … are thinking about investing in a safer place, with a safer issue that’s going to be able to navigate some of the challenges we have ahead.”

In supporting these conversations, the trillions of dollars required to achieve the SDGs can be unlocked and invested in the places and people where the greatest impact can be made.

Supporting sustainable investment through data

One important toolset supporting investors is data. “We’re seeing an incredible demand for deeper, and more sophisticated analytics,” said Rahul Ghosh, head of ESG outreach and research at Moody's ESG Solutions. 

Nature conservation and biodiversity risk is a common area demanding better data to drive an understanding of the relationships between businesses and the environment. Technology is filling these gaps with drones, airborne lasers, and satellite sensors, among the approaches to collating high-resolution images that can analyze biodiversity risk and loss.

“Here at Moody’s we took some research recently using satellite imagery that showed around 30% of company facilities across 5,000 of the largest companies globally have at least one facility that is associated with biodiversity loss,” Ghosh explained. “Now, development of this type of analytics is still in its early stage, but we expect it to grow … over the next few years.”

Also expected to grow is the demand from investors for granular datasets that enable them to analyze the long-term impacts of climate change or other risks directly to buildings and households. In the United States, Ghosh explained that half of all zip codes would be given higher flood and heat risks, impacting investment decisions, including encouraging the private sector to invest in sustainability and resilience measures.

“Data is key to connect your investor community and your corporate community. We know that corporate organizations are managing a myriad of risks,” he said. “And there is a need now — and COVID has reinforced this — to put a greater emphasis on scenario planning, on investing for resilience as well.”

Changing corporate practices

Data on corporate practices, including gender diversity, inclusion, regional and ethnic diversity policies, also influence investors. The chief financial officers task force reinforced the importance of key performance indicators, disclosure, and other accountability information to assist investors looking for smart investment vehicles.

But according to Mabinty A. Koroma-Moore, founder and CEO at Legacy Impact Venture Enterprises Africa, this is just one area of discussion with the private sector that needs to occur to change practices that will lead to smarter investments — including investment that drives more capital into African women-led businesses.

Examples of how corporate investors are using a gender investment lens will help encourage greater investment in areas where it will make the most impact. And encouraging both companies and investors to look internally at their unconscious bias that may make them overlook investment decisions, Koroma-Moore said, will be key to driving change.

“In terms of deploying more capital, when you don’t apply a gender lens [or] when you’re not using an inclusive lens, you’re leaving potential opportunities [for] positive impact on the table. And we can’t afford to do that now if we’re to achieve the 2030 agenda.”

A common language is critical

Thanks to the sustainable development goals, the concept of sustainability for the private sector is changing, which encourages the private sector to move from investing simply in sustainable projects to building a sustainable business model, said Alberto De Paoli, CFO at Enel. But to unlock capital, all players — including public, private, and NGO — need to be speaking the same financial language.

“It’s really important we have a common language when we are talking about sustainability,” he said. “Now that sustainability is becoming a business; we need to have the same words [across] the world.”

Mather said that in doing business across the world, this was going to be critical in aligning goals. Up until now, he said the world has been speaking “20 different languages on sustainability.” The SDGs were aligning conversation, including data needed to measure risk and impact.

But more work is still required, with the CFO task force gathering information on what standardized language for sustainable finance should sound like to facilitate communication and investment.