Impact Investing for Sustainable Development
By admin March 2, 2017

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Impact investments are investments made with the intention to generate social and environmental impact alongside a financial return. The steadily growing impact investment market in recent years has attracted an increasing number of individual and institutional investors, including development finance institutions, banks, private foundations, pension funds, and insurance companies. According to a Report by the Forum for Sustainable and Responsible Investment, from 2014 to 2016, sustainable, responsible, and impact investment enjoyed a growth rate of more than 33 percent – increasing from $6.57 trillion in 2014 to nearly $9 trillion in 2016. Leveraging the financial resources from private sector, impact investing provides exciting opportunities to address many pressing challenges the world is faced with, such as healthcare, education, renewable energy, sustainable agriculture, and many other key sectors in global development.

As the United Nations (UN) channels investment for the Sustainable Development Goals (SDGs), the market for impact investing enjoys huge growth potential. Introduced in September 2015, the 17 SDGs and 169 specific targets are for the people, the planet, and common prosperity. The Goals and targets will stimulate action over the next 15 years in areas of critical importance for humanity and the planet. As such, the SDGs brings tremendous opportunities for impact investment. The UN estimated that there is a $2.5 trillion annual funding gap in developing countries alone. Key sectors that call for incremental SDGs investment needs in low- and lower-middle-income countries include health, education, social protection, agriculture and food security, access to modern energy, telecommunication infrastructure, and ecosystems. Climate mitigation and adaptation investment needs in power infrastructure and agriculture are especially high.

Take education as an example. SDGs attached great importance to quality education, which is an expansion of the education agenda compared with the Millennium Development Goals (MDGs). Therefore, many countries are in demand of greater investment in their education systems. The Education for All Global Monitoring Report (UNESCO) estimates an annual financing gap of 20 billion between 2015 and 2030. Investment is not only needed to improve school infrastructure. Good education is closely associated with the development of many other sectors, such as access to electricity, water and sanitation, transportation services and the increasingly used information and communication technologies. Currently, public financing is the major source of investment in education sector in developing countries. However, evidence shows that privately-operated school can also produce good learning outcomes. Moreover, the synergies between education and other sectors provide promising opportunities for impact investment.

The UN recognized the importance of private financing and public-private partnership to achieve the ambitious SDGs. In October 2016, the UN launched the Financial Innovation Platform, which aims to identify and pilot innovative finance instruments that can drive investment and support SDG interventions. Last month, nearly 20 leading global banks and investors, totaling $6.6 trillion in assets, launched the Principles for Positive Impact Finance which aims to channel money managed by banks and investors towards clean, low carbon, and inclusive projects. The cost of achieving SDGs, therefore, also indicates opportunities for investors to engage with the SDGs and create positive social and environmental impact through investment.

In his remarks at the Financial Solutions for the Sustainable Development Goals, President of the 71st Session of the UN General Assembly, Mr. Peter Thomson, recognized the importance of clear policy directives to help shift trillions of dollars in private sector towards priority sectors. He also called for “governments, companies, investors, policymakers, regulators and civil society alike to act openly and cooperatively to drive this shift towards sustainable practices.” Against the backdrop of increasing need for private financing and partnerships in global development, impact investing represents key efforts for partnership to achieve a sustainable future and to transform our world for the better.

Read more:

What You Need to Know About Impact Investing

Investment Needs to Achieve the Sustainable Development Goals

Higher Impact Portfolios Can Outperform

UN Launches SDGs Financing Platform

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