Case Study

Seeking Alpha via the SDGs

Regulatory interventions in Europe and Asia, combined with growing consumer interest in social and environmental impact finance, are resulting in mainstream investors increasingly entering the SDG-related product market.

With climate bonds demonstrating strong growth in recent years, financial firms are beginning to explore other areas of impact that have less market saturation, such as fresh water access, sustainable consumption and the circular economy.

Credit Suisse and Lombard Odier have joined forces to launch a responsible consumer fund aimed at spurring progress towards the targets of SDG 12: Responsible Production and Consumption. Credit Suisse has said it will use the fund to invest in businesses whose core purpose is to drive momentum towards more sustainable models of consumption and production by producing sustainable products and services.

Meanwhile BlackRock, the world’s largest asset manager, has launched its first circular economy fund as part of a new partnership with the Ellen MacArthur Foundation. The fund is designed to drive investment in three broad categories: companies that adopt the principles of a circular economy in their business operations; companies provide innovative solutions enabling others to become circular; and thirdly, beneficiaries — companies that will likely experience growth from the transition to a circular economy (for example aluminum can producers that will benefit from markets shifting away from single use plastic packaging).

"As more financial institutions enter the impact investing and SDG-related ETF space — and the market becomes increasingly competitive — we're going to see clients and other key stakeholders casting a much more critical eye over the impact and effectiveness of these products and initiatives. SDG-washing is going to be under the microscope."
Christina Wong, Director, SustainAbility

Investors are increasingly recognizing the financial risks associated with sustainability challenges, such as dependence on scarce resources, as well as the scale of opportunity presented by the transition to a sustainable economy. Early adopters are benefitting from high growth in SDG-related investment products. As the market matures, asset managers can expect greater scrutiny regarding SDG-related investment products and their real-world impact measurement. Developing more rigorous, standardized data to assess product impacts will be a key challenge that will need to be addressed in the near future.

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