The United Nations Sustainable Development Goals (UN SDGs) offer a good guide for investing in companies making a positive impact on society. But where do you begin? Start by drilling deeply into the SDGs themselves to identify investible themes.
There are many ways to create a sustainable portfolio. Some investors choose to simply exclude shares of companies that do harm, from weapons producers to tobacco manufacturers. We prefer a proactive approach, targeting companies that do good for society and the environment while also offering strong return potential.
The UN SDGs can help investors pursue such an agenda. With 17 goals and 169 specific targets, the SDGs are an ambitious program—with a massive scope. They address areas of critical importance to humanity, including eliminating poverty and hunger, improving access to education and healthcare, and addressing the negative impact of climate change. Signed by 193 nations, the SDGs attempt to build on the earlier Millennium Development Goals by broadening the focus beyond developing markets and explicitly considering a role for the private sector. These important changes make the SDGs a more useful tool for equity investors.
It would be impractical for an investor to try to focus equally on all 17 goals, because the investing opportunities for the private sector aren’t spread equally across the SDGs. Instead, we believe the best way to use the SDGs is to identify those that offer the best investible opportunities and to target those specific areas. This thematic approach also allows an investor to develop expertise that can support effective allocation of capital.
Unlocking Investment Potential of UN SDGs
To map out a framework that connects the SDGs with the private sector, it’s important to dig deeper than the 17 SDGs themselves. While the SDGs offer simplicity, we think they aren’t detailed enough to serve as an investment foundation. Instead, we evaluated the 169 SDG subtargets that exist underneath the 17 SDGs. These subtargets are much more detailed and, in our view, are key to unlocking the investment potential of the SDGs.