The Roadmap For Investing In a Sustainable World

At a time of rising temperatures and shrinking forests, when more than 800 million people are undernourished and nearly a third of the global population lacks safe drinking water^footnote1, the world’s environmental and social challenges can seem insurmountable. And yet, the desire of private investors to help find and create solutions keeps growing. According to a 2022 report, the Global Impact Investing Network (GIIN) estimated the size of the global market for impact investing at roughly $1.16 trillion.^footnote2

But what will it take to translate desire into tangible, lasting solutions for problems so large? The world has trillions of dollars to invest in infrastructure and environmental change. The question is, can it get organized? It’s a challenge the United Nations Sustainable Development Goals (SDGs) seek to solve — and in doing so provide both individual and institutional investors the opportunity to put their money where it has the greatest impact. “Government or charitable giving alone do not have sufficient resources to meet the world’s sustainable development needs,” notes Brian Moynihan, CEO, Bank of America. “Private sector leadership is needed to engage the capitalist system in order to mobilize investments on the scale necessary to meet global challenges.”

While you can’t invest directly in SDGs, the goals create a roadmap for putting the vast power of capitalism to work on 17 goals that range from ending world hunger to increasing access to clean and renewable energy. That means funding industries that are working to develop products and solutions to meet the goals outlined by the SDGs. And it means financial firms developing innovative investment opportunities large enough to address global needs, yet flexible enough to attract institutional or individual investors at whatever level of risk and reward is most comfortable for them.

Solutions as large as the challenges

“The SDGs are a game changer because they have been designed with private investors in mind,” says Anna Snider, head of CIO Due Diligence in the Chief Investment Office for Merrill and Bank of America Private Bank. “Now, individuals can direct their investment dollars to join the movement to harness trillions of dollars in capital toward creating a more sustainable future for us all.”

These 17 broad, interrelated sustainability goals are supported by clearly defined measurement requirements and success metrics.

Investors seeking more competitive returns may find them in industries, technologies and companies developing new products aligned with SDGs. Market opportunities in areas such as food and agriculture, smart cities, energy and materials, and health and well-being continue to grow.

Opportunities could include investing in companies developing new technologies to reduce energy use in buildings, sensors enabling doctors to monitor patients remotely to address medical conditions before they become a problem, or technologies that help reduce food waste by getting produce to market faster. The urgency to deliver on the SDGs has only been increased by the coronavirus pandemic, with several governments recognizing that the SDGs can act as a guide to the global response.^footnote3

Such opportunities are sure to expand in the months and years ahead. According the U.N., achieving all 17 will require between $5 and $7 trillion a year^footnote4 —a level that traditional sources such as government funding or nonprofit grants won’t be able to meet. Yet, considering the global equities market reached $111 trillion in 2022^footnote5, private investment, combined with the SDG blueprint, could put success within reach. Says Snider, “People very much believe in the power of capitalism to make a difference.”

Businesses working for a better world

Achieving the United Nations Sustainable Development Goals will require active participation by private companies. For its part, Bank of America is committed to developing innovative financing for SDGs. For example, in 2021 the bank announced a $1 trillion environmental business goal, achievable by 2030, to help accelerate the transition to a low-carbon economy.

To learn more about how the SDGs are helping to create a more sustainable world, visit the Bank of America Sustainable Finance page.

Sustainable and Impact investing and/or Environmental, Social and Governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values-based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating. Impact investing and/or ESG investing has certain risks based on the fact that ESG criteria excludes securities of certain issuers for nonfinancial reasons and therefore, investors may forgo some market opportunities and the universe of investments may be smaller.

The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”).

Updated on 12/12/22