Every year, the 25th of September is designated as SDG flag day – a day dedicated to recognising the importance of fighting for a better world. The Sustainable Development Goals (SDGs), as created by the United Nations in 2015, are 17 global goals aiming to tackle some of the biggest challenges we face - poverty, inequality, climate change, and more.
This is not just a day for governments and non-profits, it is also a huge deal for investors and, by extension, for their investment managers. For all investment managers, not only those in the responsible investing world, SDG Flag Day is a chance to pause and think about how the capital they allocate can be used as a force for good. The SDGs and ESG (Environmental, Social, and Governance) factors fit together perfectly to provide a framework to design investments that support both financial measures, and positive global change.
Why should the SDGs matter to Investment Managers?
Now that is the question! Well, it turns out that businesses that take ESG and SDGs seriously, frequently perform better in the long run. Why? Because they’re thinking ahead - addressing risks that could impact their operations, avoiding regulatory issues, and staying in line with changing consumer expectations.
For example, companies that prioritise sustainable water practices (SDG 6: Clean Water and Sanitation) not only ensure communities have access to clean water; but they also reduce their own risks related to water shortages, rising costs, and potential regulatory changes down the line.
Additionally, companies that focus on goal 7 (Affordable and Clean Energy) reduce their carbon footprint, but also lower their operational costs by investing in renewable energy sources like solar or wind. By doing so, they avoid the volatile energy prices, meet regulatory requirements for emissions, and appeal to eco-conscious consumers.
It’s a win-win: the company helps solve a global problem, appealing to value led investors, but also saves themselves from trouble and/or rising costs.
This is where the magic of SDGs intersects with smart investing. If Investment managers can highlight companies that are forward-thinking, then the investor will be better positioned to handle market changes and future-proof their portfolio.
Using investment power to drive accountability:
Another way in which investment managers, and in turn investors, can contribute to the SDGs, is through accountability. By holding companies accountable for their ESG performance, investors can secure a foothold in ensuring companies comply with sustainable practices and goals. SDG Flag Day is a perfect time to highlight how voting on shareholder proposals, or engaging with company leadership, can encourage businesses to take greater responsibility for implementing change.
Additionally, with the growing market around making informed and value driven investments, there are now multiple tools at our disposal to direct money towards SDG aligned businesses – including impact investing and sustainable bonds.
The Rise of Responsible Investing
Responsible investing isn’t just a niche thing anymore; it’s going mainstream - in a big way. Recent estimates show that global ESG assets could hit $50 TRILLION by 2025. Investors everywhere are waking up to the fact that sustainability and financial returns go hand in hand.
SDG Flag Day is a great reminder of why aligning investment portfolios with global sustainability goals isn’t just the right thing to do - it’s also a smart move financially. Companies that prioritise sustainability are often better prepared for future challenges, making them strong, long-term investments.
A Time to Reflect and Act
As SDG Flag Day approaches, it’s a great time for investors to take a step back and think about the role they play in tackling the world’s biggest issues. At our responsible investment research company, we use this day to spotlight how our ESG research helps investors make informed decisions that contribute to sustainable development. By looking at more than just financials, we help investors find companies that are leading the charge in achieving the SDGs.
So, this SDG Flag Day, let’s all take a moment to celebrate the progress we’ve made and recommit to investing in a future that’s better for everyone. Whether you’re just starting out in responsible investing or you’ve been at it for years, there’s always more we can do to ensure that our capital is working for the greater good.
Because, at the end of the day, investing responsibly isn’t just about making money - it’s about ensuring that the power of capital is used to shape a better tomorrow for all.