The must-know facts about SDGs in an investment context
By: Marimar Torreblanca
Tags: Consulting, Sdgs, Esg Investing, Esg, Finance

July 9th, 2020

This week I want to briefly discuss what companies and investors need to know about the UN’s SDGs and how they can incorporate SDG-related goals into their investment process or business model.

The UN launched its Sustainable Development Goals (SDGs) in 2015. Since then, there has been a continuous discussion on how institutional investors can contribute to them, and if they should. There have also been numerous companies aligning their strategies to specific goals.

SDGs cover a wide range of topics (as can be seen below), and they were defined as the most pressing risks for the world’s sustainability were narrowed down. In this sense, any company or investor who is exposed to the macro story, is exposed to SDGs (whether deliberately or not). At the same time, both companies and investors who are seeking areas of potential growth in the economy, are well served thinking long and clear about SDGs as they may offer some clues into what could come next.

So, if everyone is already involved with SDGs (even if implicitly), wouldn’t it be best for all to actively manage this exposure? If so, how can this be done?

Earlier this week, the UN PRI released a report directed towards its signatories (which have a combined US$89 tn in AUM) with a five-part framework to understand the outcomes of their investments and shape them in line with SDGs. We believe the exercise would be useful to companies as well. The five parts are the following:

Identify outcomes — map existing investments to SDGs, determine the scale of these investments, identify both positive and negative outcomes from operations, products, and services. Set policies and targets — move from unintended outcomes to taking intentional steps to shape outcomes. Investors shape outcomes — shape these outcomes, report on progress. Financial system shapes collective outcomes — the result from aggregating individual actions as well as investors and other system participants (rating agencies, proxy advisors, banks, etc.) acting collectively. Global stakeholders collaborate to achieve outcomes in line with the SDGs — since the financial system can’t do this alone, here the collaboration of businesses, governments, academia, and even the society will be relevant.

So, how aligned is Mexico to this agenda?

In the latest voluntary national review for the High-level Political Forum on Sustainable Development, Mexico presented the following measures and commitments for the implementation of the 2030 Agenda:

The creation in 2015 of a Specialized Technical Committee on the SDGs.

The creation in 2016 of a Senate Working Group for Monitoring the Legislative Implementation of the SDGs.

The creation in 2017 of the National Council for the 2030 Agenda for Sustainable Development.

The creation in 2018 of the Subnational 2030 Agenda Implementation and Follow-Up Agencies.

The incorporation of the SDGs into national and sub-national development goals and budgets.

Naturally, since 2018 many things have changed in the country (and with COVID-19 the macro outlook has been shaken even further). It will be important for the mechanisms to be as institutional as possible, and the visibility on how much progress can be done on this subject right now is low. Thus, we believe the baton right now is with the private sector. And on that note, if we look at the Top 10 public companies measured by weight in the S&P/BMV IPC (the main index in the Mexican Stock Exchange), 100 % report their alignment to SDGs in their annual sustainability or integrated reports. Since the first step is mapping these links, this seems promising.

I hope you found this useful. As usual, if there is anything we can help you with, please reach out.

Best,

Marimar

Partner, Miranda ESG