The US$50 trillion sustainability question
by Ben Poole
The UN Sustainable Development Goals (SDGs) are not getting the investment needed to help the world meet critical targets for combatting challenges such as poverty and climate change by 2030, according to research from Standard Chartered.
A survey conducted between July and August 2020 of the $50 Trillion Question Investor Panel, made up of asset managers from the world’s top 300 asset management companies with total assets under management (AUM) of more than US$50 trillion, found that:
- 20% are unaware of the SDGs.
- Only 13% of their US$50 trillion of investment is linked to the SDGs.
- 64% of their AUM is invested in Europe and North America, with only 5% in Middle East and Africa combined, even though investors say emerging-market investments outperform.
- Lack of investment in emerging markets puts the chances of meeting the 2030 SDG deadline at risk
Not enough investment is linked to the SDGs
The research points to a growing focus on sustainability, with 81% of investment firms now taking a disciplined approach to environmental, social and governance (ESG) investment. However, this is not translating into investment in the SDGs. Only 13% of the assets managed by our respondents is directed towards SDG-linked investments.
Some 55% claim the SDGs are not relevant to mainstream investment and 47% say investment in the SDGs is too difficult to measure. However, one fifth of investors admit that they were not aware of the SDGs.
Table 1: What are the main barriers to benchmarking investments against the SDGs?
|The SDGs are not relevant to mainstream investment||55%|
|We plan to start measuring investments against the SDGs but haven’t achieved that yet||50%|
|Investment in the SDGs is too difficult to measure||47%|
|The SDGs aren’t relevant to how we assess our investments||47%|
|We don’t make investments that contribute to the SDGs||66%|
Respondents point to regulatory changes, favourable tax treatment, evidence of higher returns, better data for measuring impact, and increased demand from retail investors as the top five factors that might spur on more SDG investment.
Table 2: What are the tools and incentives to encourage SDG investment?
|Regulation that encourages SDG-linked products||74%|
|Favourable tax treatment of SDG-linked investments||63%|
|More evidence that investing in SDGs will not lead to underperformance||63%|
|Better data to measure the impact of SDG investments||53%|
|Retail investor demand for SDG-themed investments||53%|
Emerging markets are seeing a massive shortfall in investment
The Standard Chartered research shows that almost two-thirds (64%) of AUM are invested in the developed markets of Europe and North America. Asia, which includes a number of developed markets, takes 22%, while just 2% of the assets are invested in the Middle East, 3% in Africa, and 5% in South America. This contrasts with 88% of investors saying that investments in emerging markets have matched or outperformed developed markets over the past three years.
The perceived risk posed by emerging markets is a major barrier to investment. More than two-thirds of investors believe emerging markets are high-risk, compared to 42% who believe the same for developed markets.
Meanwhile, COVID-19 may have made it even harder for emerging markets to get the investment they need. Some 70% of investors believe the pandemic has widened the capital gap further.
Table 3: Which markets are getting the most investment?
“Much progress has been made in recent years to realise the SDGs, but this study makes clear the need to move faster," commented Simon Cooper, CEO, Corporate, Commercial and Institutional Banking at Standard Chartered. "A seismic, unprecedented surge in private-sector investment - alongside public investment and commitments - will be required to bridge the gap and hit the 2030 SDG targets. There is no single answer to The $50 Trillion Question, but it is evident that investors need to expand their focus beyond developed markets if we are to achieve these goals. Emerging economies offer investors a unique opportunity: strong returns combined with the chance to have a significant, positive impact. Now is the time to seize it.”
The $50 Trillion Question study follows the publication of Opportunity 2030: The Standard Chartered SDG Investment Map which first revealed the multi trillion-dollar opportunity for private-sector investors to help achieve the SDGs in emerging markets.
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