Why Investors Want a Bigger Role in Shaping the UN’s Sustainable Development Goals

If you are looking to achieve positive sustainable impact through investing, you likely use one global central framework: the 17 Sustainable Development Goals agreed by the United Nations in 2015.

These are part of an agenda for sustainable development for 2030 that were adopted by U.N. member states. The SDGs are “a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity.” Their societal aims really could not be any higher. No poverty, zero hunger, equality, climate action, health, peace, and justice are all words that feature prominently.

But more than halfway through their intended cycle, it is clear that we’re a long way from achieving the SDGs’ aims. U.N. Secretary-General António Guterres recently declaring that only 15% were on track. Outside the U.N., others are also concerned that, “by going for incredibly expansive goals, we’ve lost the accountability for progress,” said David Miliband, president and CEO of the International Rescue Committee, an NGO providing relief in conflict- and disaster-stricken zones, at a recent event in London.

Enter the U.N.’s Summit of the Future, to be held in New York City on Sept. 22-23, and which seeks to find new ways to deliver on the SDGs’ promises. And this time, investors want to be part of the conversation.

Investors Want a Bigger Role in Sustainable Development

So, what went wrong? Investors weren’t part of the discussion, based on a survey that Morningstar Sustainalytics conducted this summer. (Morningstar Sustainalytics will attend the summit with the aim of communicating investor views on impact sustainability to the U.N., particularly the importance of environmental, social, and governance data to support the SDGs.)

Responses to the survey by 40 institutional investors revealed that 95% of those organizations had no involvement in the drafting phase of the SDGs, around 10 years ago. Yet today, 85% of them believe there is more of a role for ESG research and investment to play in delivering on the goals.

For example, the investors we surveyed would like to see a policy environment that supports businesses trying to implement the SDGs, and investor-focused frameworks that better lend themselves to practical application of the goals. And, as Miliband alludes to above, a more intensive focus on fewer key topics, particularly climate change and zero poverty, would be welcome.

Right now, integration of ESG themes into investing seems to play a much bigger role in these investors’ processes than SDG integration. Make no mistake: The two are intimately connected. If the SDGs represent the destination, as agreed by the U.N.’s member states, then the metrics that indicate progress on ESG themes are important mile markers on the route. If you don’t see those, you’re probably on the wrong highway.

Still, our survey uncovered a surprising finding. Nearly all (97.5%) of the investors integrated ESG considerations in their investment decision-making in some way. But only 35% of these claimed that the SDGs played a “significant” or “vital” role in how they did that. Respondents to the survey often indicated that the SDGs often helped inform their thinking on sustainability and impact but were not central to their investment decision-making.

What SDG Options Are Currently Available to Investors?

Indeed, a quick look through Morningstar Direct shows there are few funds that directly reference the SDGs. My colleague Quinn Rennell found 44 funds that directly reference the SDGs. You can see the 15 largest such funds, by assets, in the following table. In the US, one option is the iShares MSCI Global Sustainable Development Goals ETF SDG.

15 Largest SDG-Focused Equity Funds

Although this results in stock selections perceived to do less harm to society and the environment, investors seeking diversification should pay close attention here. It is unsurprising that these funds contain zero or minimal exposure to defense or conventional energy stocks, given their role in conflict and climate change.

It is notable that just three sectors—technology, healthcare, and industrials—make up over 60% of the value of stocks in these funds.

Perhaps there’s no stronger illustration that we still have a long way to go before the thinking embedded in the SDGs finds its way into mainstream business or investor strategy. The Summit of the Future, and investors’ keenness to participate, may prove to be a turning point.