New investor alliance launches to tackle SDG financing

UNITED NATIONS — The United Nations has announced the creation of a Global Investors for Sustainable Development Alliance, which will bring together a group of chief executive officers as part of its efforts to more closely align the international financial system with the 2030 agenda.

The alliance, which was announced at the Financing for Development Forum and will be officially launched in September, is inspired in part by a Swedish initiative and came after an examination of work the U.N. was doing with the private sector, said Navid Hanif, director at the U.N. Department of Economic and Social Affairs’ Financing for Sustainable Development office.

The U.N. saw a role for itself as an impartial convener to help companies who said they want to engage on SDG-related investments, but are worried about competitive pressure and losing clients, he said.

The alliance will be CEO-owned and will build out its own working groups and networks based on the needs, but the U.N. would like to see concrete ideas by 2021 with evidence of advances being made, Hanif said.

“There is hope, cautious optimism it will make a difference, will set in motion changes that gain momentum and make a difference,” Hanif told Devex.

One of the key changes is that current policies don’t capture risks or externalities in pricing, and U.S.-based institutional investors have told the U.N. privately that they would like to change the definition of fiduciary responsibility to be able to capture those factors, Hanif added.

The Swedish initiative that inspired the GISD is Swedish Investors for Sustainable Development, which was formally established in 2017. After several years of working with producing companies on development issues in the lead up to the adoption of the SDGs, the Swedish International Development Cooperation Agency wanted to find a way to also work with investors.

Investors were invited to a dialogue that eventually became SISD, which now has six working groups tackling different Sustainable Development Goals. It operates at three levels: CEO meetings, operational level preparing meetings, and working groups.

“One of the lessons that could be taken to the GISD is that it’s important, or it’s a must, to have an active CEO-level participation because that makes it possible for others in the companies to work in the same direction,” Sida Director-General Carin Jämtin told Devex. There also needs to be good preparation and work at the operational level, she added.

Within SISD, investors are deciding what kinds of working groups they create, and how each of them work so they’re often working in different ways and at different paces, yet they all have achieved concrete results, Jämtin said.

SISD isn’t tackling all of the SDGs, only the ones that investors have chosen to focus on, but it is likely that GISD will need to address them all. Jämtin said that needs to be done in a way that is in line with the investor’s ability to engage. So her two key recommendations are “CEO participation and then quite concrete work,” she said.

One of the SISD working groups helped create a sustainable cities bond with the World Bank, which brought competitors together on the same investment, and there are ongoing conversations about the possibility of other bonds.

While these companies have to work within regulatory systems, they can push regulations, Jämtin said.

In order to “level up the pace,” companies need to work together on regulations that look at “how to achieve performance as a whole, not sacrificing planet, climate, humans,” Liza Jonson, CEO at Swedbank Robur, the largest mutual fund company in Sweden, said at the U.N. About 83% of Swedish assets governed by the Financial Supervisory Authority have some sort of sustainability criteria, Jonson added.

Swedish pension fund Alecta is charged with delivering good, risk-adjusted returns 30 or 40 years down the road, and needs to find solutions to be able to allocate more capital aligned with the SDGs to manage risk, said Magnus Billing, Alecta CEO.

To do that, there needs to be more products for SDG investment and more forward-looking data, he said.

“I hope GISD is a formidable platform for addressing issues,” Billing said.