Collectivism, responsible investment and the SDGs: Redefining us…now or never! (PART 1)

As May 2020 draws to a close, we are seeing many rays of light starting to shine through.  We must tenaciously hold onto this optimism as we consider the changes that will be needed to how we view financialhuman and natural capital and their interconnectedness to the UN’s Sustainable Development Goals (SDGs).   Our individual and corporate perspectives are fundamental to the next stage in our journey to deploy these types of capital more responsibly.  This gives me much hope, so let me share why:

 

• Capital market volatility is highlighting flows to companies that want to make a difference  We are acutely aware of the $5tn annual flows needed to help ensure we meet the SDGs, be it through investments in infrastructure, renewables, carbon capture and storage or socio-economic stabilisation mechanisms.  Volatility has put a lump in our throats; however, it is demonstrated that capital is available and can be mobilised quickly when needed.  Investment strategies with integrated ESG practices have been net beneficiaries to much of these injections and redistributions of capital.  This is now a critical opportunity for us to really focus in on how this capital is deployed and toward which SDGs and via which mechanisms.  
 
• Transparencykey to ensuring SDG impact – Our focus now must be on ensuring companies are transparent in showing how this capital is impacting the various underlying targets and indicators set out in the SDGs.  ESG rating agencies are upping their game on transparency of their ESG methodologies, and one proxy voting companyhas even published a tool to help track both positive and negative impact on the SDGs.  This transparency is needed and well timed to ensure capital is deployed appropriately. Government policy must follow suit and many pledges have been made.  We must each do our part now to ensure we act individually and at a company level to ensure these “ESG” policy levers are implemented, that our respective companies take advantage of them to maximise their value to society, their stakeholders (present  and future!) and that we not shy away from reporting on positive and negative SDG impacts.
 
• Covid-19: A case study for collectivism.  Whilst we have witnessed some immensely disheartening realities that a pandemic inflicts on individuals and society, Covid-19 has also brought to life the interconnectedness of the world we live in and the need for true cooperation.   The inspirational side is that private, public, national and transnational boundaries are muted (somewhat) by challenges of this perplexing virus.  The response is demonstrating the collectivism under which we can operate as humanity.  Whilst far from perfect, we can unite when it matters andwill be paramount to our ability to tackle the goals set out in the UN’s Sustainable Development Goals.  Let’s make collectivism our “defacto approach going forward!
 
• Redefining shareholder value through purpose. Whilst discussions around a company’s “purpose” have been around for several years, its nice to see that corporate rebranding is shifting from website and marketing materials into Board and executive mindsets.  Danone has just branded itself “entreprise à mission” and others will follow. What is key to remember is that waren’t going against Friedman’s “maximising shareholder value”; we are merely refining what shareholders value and demonstrating that conscious capitalism is possibleprofitable and actually necessary to sustainabldevelop our planet.  For each of the 7.6bn of us, we have an immense opportunityto also reflect upon our individual purpose.  It’s trickier than we think but hugely rewarding so let’s be courageous in pursuing it!
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Troy is a Sustainability and Responsible Investment professional with over 20 years of experience assisting companies and participants in the Asset Management industry to enhance their governance, risk and responsible investment practices. Troy is the former Director, Head of Sustainability and Responsible Investment for KPMG.

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