The U.N.’s 17 Sustainable Development Goals (SDGs) have become a foundation for impact-oriented investment strategies since their adoption in 2015, leading to a boost in investor interest.
More and more investors are looking for opportunities that credibly deliver progress in the SDG area. Although the private sector is explicitly recognized as an actor in achieving the SDGs, official indicators in the SDG framework continue to focus on government action. There is still no general system, framework or methodology for measuring the impact of private investments. Due to this diversity in approaches to measure and quantifying the contribution of private investments on the SDG front, there is still a major discrepancy between funds that effectively deliver positive results backed by clear and transparent data and those that use the SDGs primarily for orientation and as a marketing tool.
Milena Bertram, Director Impact & Sustainability at Finance in Motion, believes that although transparency and traceability, underpinned by concrete metrics, are core to demonstrating SDG investment impact, measurement alone is not sufficient. “In order to really generate positive change, investors must anchor the impact goal in their investment strategy. We have to see more strategic intentionality, impact-generating investments that can trace an impact back to the actual investment. Impact funds, such as those advised by Finance in Motion, have been proven to deliver impact in alignment with SDGs.” Unlike environmental, social, and governance (ESG) investments, which focus primarily on avoiding negative outcomes, impact funds generate pro-active, positive change while seamlessly embedding the SDGs into the investment strategy. “There is an immediate need to incorporate robust metrics into the fabric of the investment approach,” Milena added.
"Reporting on the impact in a responsible and transparent manner creates trust, which has the effect of attracting more investors to impact investments – and thus mobilizing the capital needed to effect positive change.”Milena Bertram, Director Impact & Sustainability at Finance in Motion
Although further conceptual development is required to develop relevant indicators and the corresponding measurement methods for the goals formulated in the SDGs, specialized asset managers who integrate SDGs in developing impact products, and underpin them with solid metrics, are best positioned to offer a special added value to SDG-minded investors.