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Investing in the UN’s 17 Sustainable Development Goals (SDG)

Transitioning to a more sustainable world will require mobilizing capital — that’s already available — at a scale not yet seen

What will it take to create a more sustainable world?

Six trillion dollars per year over the next decade, according to the World Bank.footnote1

It will also take a concentrated effort across every constituency to lift 650 million people out of povertyfootnote2 and provide 1.8 billion peoplefootnote3 access to sanitation, among other challenges. To help frame the challenge and organize the response, the United Nations has identified 17 Sustainable Development Goals (SDGs) and their estimated cost. The SDGs are a roadmap of sorts, providing direction on what the biggest issues facing society are, and what is needed to solve them.

More than half of the funding needed is already flowing from governments and philanthropic organizations toward projects identified by the SDGs. But, there’s still roughly a $2.5 trillion gap. The reality, according to Alicia Seiger, managing director of the Stanford University Sustainable Finance Initiative, is, “Global-scale challenges require investment that exceeds public coffers.”

Tapping global resources

Major financial institutions, because of their scale, reach and expertise, can play a key role. Globally, pension funds alone control more than $36 trillion in investible assets. Insurance companies represent another $18.8 trillion, wealth managers nearly $70 trillion, and banks more than $85 trillion.footnote4 Along with that financial strength comes a growing sense that profit and purpose go hand in hand, says Brian Moynihan, chairman and chief executive officer of Bank of America. “Many stakeholders understand that they have to produce great results — and create greater benefit for society.” But tapping into this capital isn’t a straightforward process.

 Brian Moynihan

"Many stakeholders understand that they have to create greater benefit for society."


Charmain and Chief Executive Officer of Bank of America

In fact, the issues are so large that raising the funds needed to address them requires the involvement of the entire capitalist system. According to Paul Donofrio, vice chair of Bank of America, the private sector and financial institutions have a key role to play in driving more investment in sustainable, low-carbon solutions that can scale net zero business activities and economy.

Paul Donofrio headshot

Paul Donofrio, Vice Chair of Bank of America

“If governments, NGOs and the business community work together, we can do so much more,” he says. “We are working across sectors with clients around the globe to drive and scale ESG focused projects. By deploying significant capital, we are directly moving the dial to help our clients and industries achieve net zero and social advancement.”

 

How capital attracts capital

One approach, called blended finance, aims to attract more investors by removing some of the investment risk. For example, a development bank or nonprofit organization that has lower return expectations provides the first layer of financing to a project that has a higher risk profile, sometimes due to size or location of the project, such as micro power grids in Kenya. By taking on a share of the risk and remaining invested for the duration, this first investment makes it possible for other private sector investors to join. Pension funds, insurance companies, banks and others are then able to invest at a risk level that suits their needs.

Through this process, a relatively modest investment can attract many times its initial amount from private sector financing. And because that development bank or nonprofit isn’t trying to fund the whole project alone, those organizations can use their resources to seed and sustainably finance a wide array of projects.

 

The business benefits of a sustainable world

From North and South America to Europe, Asia and Africa, there’s a growing awareness that solving the issues outlined in the SDGs is critical to a healthy bottom line. “Agriculture and related industries account for more than half of Kenya’s GDP,” says Nuru Mugambi, creator of the Kenya Sustainable Finance Initiative and Kenya Green Bonds Program. “If flooding destroys tomato crops, damage ripples from farms to transportation to food manufacturing.”

Quantifying the economic impact of climate change is difficult. According to one report,footnote5 the cost of not addressing climate change could reach $1.5 trillion per year in the US alone — while removing almost a million jobs from the economy. On the flip side, the SDGs identify the missed opportunities that stem from global issues such including climate change. The Deloitte Economics Institute noted that decarbonization could add $3 trillion to the US economy over the next fifty years, add a million jobs and offers a “once in a generation transformation” opportunity.

In light of these global challenges and opportunities, individual companies are considering how they can both minimize their own impact on the environment and foster healthier communities, while benefiting from pursuing the SDGs as part of their day-to-day business practices. Driving that understanding is the knowledge that when like-minded organizations pool their skills and resources, it becomes possible to address immense challenges in a meaningful and fundamental way.

Since 2007, Bank of America has provided more than $350 billion to the environmental transition. Learn more about Bank of America’s commitment to transitioning to a more sustainable economy and its efforts to realize social equality. These include a new goal of mobilising and deploying $1.5 trillion in sustainable finance capital by 2030 in support of the SDGs. Of the $1.5 trillion, $1 trillion is dedicated to the environmental transition supporting clients and a net zero economy and $500 billion focused on inclusive social development, scaling capital to advance community development, affordable housing, healthcare, and education, in addition to racial and gender equality.

Originally published on 8/3/2020