Big business means business on sustainable investment

You know something is shifting in the markets when global business heavyweights move to issue standards, industry-specific metrics and even ready-to-invest financial vehicles, all aligned with one trend. That “new” hot investment opportunity is sustainable development and we talk about it with the Co‑Chairs of the Global Investors for Sustainable Development (GISD) Alliance, the CEO of the Johannesburg Stock Exchange Leila Fourie and the CEO of Allianz Oliver Bäte.

The Global Investors for Sustainable Development (GISD) Alliance is celebrating its two-year birthday. What has it been up to since 2019? 

Leila Fourie: "Within its first year, the Alliance developed a common definition of sustainable development investing, which enables investors and asset managers to apply reasonable standards in their decision making for investments to qualify as aligned with sustainable development. With this, financial players and authorities can frame their sustainable investment products such as green bonds, sustainable funds, and exchange traded funds (ETFs) around the 17 SDGs, which helps build trust in the investment products.”

Oliver Bäte: “Also in our first year, we released a report for the financial ecosystem with over 60 concrete recommendations and actions to accelerate funding for the SDGs. For example, one of the most crucial levers is making sustainability reporting mandatory for financial and non-financial institutions.

During the pandemic, GISD focused on immediate solutions. The members issued a Call to Action on COVID Bonds to address the urgent need for billions of dollars for COVID response. This guide helps issuers link their use of proceeds to the SDGs quickly and easily. We held an extraordinary meeting on COVID-19 response and recovery and launched the GISD Navigator, which provides a structured overview of sustainable development finance initiatives.”

Leila Fourie: "And this year, we launched the SDG Investor Platform together with the UN Development Programme. The digital platform brings together capital providers and capital seekers for SDG-related investment projects. It merges economic, demographic, financial and project data into a comprehensive portal, helping both investors and project managers to identify opportunities in developing and frontier markets.”

As the world slowly recovers from COVID-19, has there been increased awareness or consideration of SDG-related investment criteria?

Oliver Bäte: "The market for sustainable finance is growing steadily, even more so in the past year. To date, global capital has clearly been steered toward net-zero emissions; we expect societal and other challenges to be added to investors’ priorities over time. The efforts of GISD and outreach campaigns by partners such as UN Global Compact and Principles for Responsible Investing have won over thousands of companies to gradually align their business practices with the SDGs.”

How is the GISD Alliance promoting the tools and platforms it is creating?

Leila Fourie: "In addition to our work on investment platforms, we are engaging with international policy making and standard setting bodies to bring our recommendations to the table. We are working with the G20 Sustainable Finance Working Group, COP 26 and G7, as well as engaging with the multilateral development banks on ways to scale up private investment for sustainable development. We have also directly engaged with the EU Commission on its Green Finance Roadmap.”

Can we expect any further outcomes this year? 

Oliver Bäte: "Absolutely. We plan to officially launch a net-zero climate ETF in collaboration with UNCDF shortly after the Annual Meeting in October. This will be an exciting new product that will provide the opportunity to invest in efforts to combat climate change.”

Leila Fourie: "The Alliance will also introduce a set of SDG-related sector-specific metrics, a project that has involved consultations with standard-setters, industry associations, and businesses. The metrics will initially cover eight industries defined under MSCI’s Global Industry Classification Standard, providing investors with key insights to help them decide whether to invest.”

Oliver Bäte: “We’re also releasing a new model mandate in collaboration with the International Corporate Governance Network (ICGN). This new, updated document will seek to define the relationship between asset owners and asset managers with a view to advancing a long-term sustainable perspective. This will provide a foundation for making future investment decisions that are aligned with the SDGs.”

Learn more about the Global Investors for Sustainable Development (GISD) Alliance here.