The simultaneous achievement of economic growth, social inclusion and environmental sustainability is the imperative of the 21st century. This imperative can be captured in two important words: sustainable development. The 17 Sustainable Development Goals agreed to by 193 member states of the United Nations in September 2015 embody these principles, with quantitative and qualitative targets and timelines through to 2030.
The goals provide an opportunity for the financial industry to recalibrate its efforts to support sustainable development. This is an important responsibility of the SDGs given the size and importance of the global financial sector. Recent estimates indicate the SDGs will require an additional $2.4 trillion of annual public and private investment into low-carbon infrastructure, energy, agriculture, health, education and other sustainability sectors globally. The financial sector — the task of which is to link the supply and demand of capital for productive investments — will be central to the world's efforts to position itself on a more sustainable path.
The asset management industry will play a particularly important role within the financial sector, given the growing size of investible assets globally and increasing interest on sustainable investing and environmental, social and governance issues. The total pool of capital within non-bank institutional investors has more than tripled from 2001, to well over $100 trillion today. As of 2016, more than $23 trillion of managed assets had some level of ESG integration.
The SDGs can play a powerful role in furthering the investment industry's engagement on sustainable investing. For that to happen, however, it is important for the spirit of the SDGs to not be lost as the goals get translated into action for the financial sector. The spirit that underlies the SDGs is about the transformation of the global economy into a system that simultaneously pursues economic growth, inclusion and environmental safety. The SDGs are therefore not about simply mapping current practices and revenue streams of issuers to the 17 goals and subsequently being named an SDG-aligned product. That is a superficial treatment of a much deeper transition that is needed and sought after by the SDGs. Keeping with that concept, I believe the SDGs can be a helpful guidepost to the financial sector in four ways.