Market Landscape

There is growing coordination around sustainable growth.

In 2015, United Nations member states unanimously adopted the 2030 Agenda for Sustainable Development, marked by its 17 Sustainable Development Goals (“SDGs”) to end poverty, protect the planet, and ensure prosperity for all. Increasingly, corporations, individuals and pooled sources of public and private capital are focusing on how their decisions affect the 169 targets underlying the SDGs.

Such thinking usually is limited to development circles in specialized government agencies and NGOs, and it reflects a shift nurtured by three structural trends, each of which began prior to adoption of the SDGs as a unifying set of benchmarks.

First, capital is responding to client demand. As wealth passes to the next generation, investors’ worldviews are more global, and their objectives include wanting to understand—and sometimes quantify—the multi-dimensional impact that they are having on people and places. In short, impact investment applies tailored metrics to quantify how you have invested for impact rather than simply invested with impact, as is always the case. This is pressuring wealth managers and asset allocators to evolve the nature, management, and geographic scope of their products.

Second, capital is adopting a more sophisticated approach to risk management. The largest sovereign wealth funds, corporates, and asset allocators are beginning to understand that their reach is so vast, and the global economy so interconnected, that any deep fissures are an eventual threat to their existence. This is demanding a longer-term view, with an eye toward addressing transnational environmental, social, and governance problems that plague sustained and balanced development. What might have previously been initiatives in corporate social responsibility are looking more like smart investment strategy.

Third, certain capital is, as always, seeking the biggest money-making opportunities, which correspond to today’s three megatrends: demographics, resource scarcity, and technological advancement. Whether it is urbanization, clean energy, or financial technology, the most consequential market opportunities are beginning to drive investment into countries and products that also happen to have the greatest potential to take meaningful strides toward sustainable and inclusive development.

These three financial realities ensure that a concerted push toward sustainable growth and more thoughtful forms of capital deployment, including impact investing, should continue for decades to come.