A growing number of investors want to play an active role in building a more sustainable future, rather than merely screening out the least sustainable industries from their portfolios. They want to make a greater impact than investing in green bonds alone allows. One efficient way for such investors to invest for good is to use the United Nation’s Sustainable Development Goals (SDGs) as a road map for buying traditional corporate bonds.
The SDGs are a set of 17 objectives the United Nations issued in 2015 in hopes of creating a more sustainable world by 2030. The goals (Display 1) cover a wide range of subjects, from clean water to gender equality. Some 193 countries have pledged to work toward achieving them.
The estimated cost of realizing the SDGs is about US$90 trillion, however—too high for the public sector to shoulder alone. Investors can help make the goals a reality by funding not only government and nonprofit efforts but ambitious attempts at self-transformation in the corporate world.
Following the SDG Road Map
Some of the 17 areas that the SDGs cover offer more investable opportunities than others. Fixed-income investors can use the 169 sub-targets within the SDGs to create a specific list of potential investments. Those targets include goals such as improving access to affordable medicine and vaccines and making clean water more widely available, and our analysis identified about 80 products and services that address the SDGs. From there, we identified 784 global issuers that offer those products and services.
Through this investment process, managers can open a window into the future: picture a bank in a poor emerging-market country that has pledged a significant chunk of microfinance loans to women entrepreneurs, a large developed-world bank that has poured money into green bonds and is lending to small- and medium-sized businesses, and a biopharmaceutical company that provides a significant portion of its medicines to the emerging world. All these corporate issuers already exist.