What are the Sustainable Development Goals?
The Sustainable Development Goals (SDGs) was introduced in 2015 as a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030. They recognise ending poverty must go together with strategies that build economic growth and address a range of social needs including, education, health, social protection, and job opportunities while tackling climate change and environmental protection. The 17 SDGs has 169 specific targets which help to catalyse actions over the 15 years.
As shown in the figure on the left, combinations of the SDGs collectively serve three primary areas, namely the Economy, the Society and the Biosphere. According to the Scaling Up Climate Action to Achieve Sustainable Development Goals report, The United Nations Development Programme (“UNDP”) pinpointed that these goals are interlinked, particularly between climate action and the other SDGs. Climate change is a cross-cutting development issue that affects every aspect of the sustainable development agenda. Thus, every party must step up to escalate climate action to achieve the SDGs by 2030.
Progress Towards The 2030 Sustainable Agenda
In 2019, Malaysia was ranked 68 out of the 162 countries assessed in the SDG Index published in the Sustainable Development Report 2019. The Sustainable Development Report 2019 describes countries’ progress towards achieving the SDGs and indicate areas requiring improvement. The SDG Index score and scores by goal can be interpreted as a percentage of achievement.
Out of the 17 SDGs, Malaysia has an exceptional achievement for SDG1 End Poverty with 100% score – zero value of the following indicators:
- Poverty headcount ratio at $1.90/day
- Poverty headcount ratio at $3.20/day
Aside from that, Malaysia has made good progress for several SDGs being:
- SDG 4 Quality Education
- SDG 7 Affordable and Clean Energy
- SDG 13 Climate Action
More effort needs to be placed in SDGs with minimal progress such as SDG 2 Zero Hunger, SDG 10 Reduced Inequalities and SDG 15 Life on Land. Detailed progress and data can be found in the report.
The Business Case To Act
The SDGs are the global sustainability-related challenges that companies must address by escalating their efforts through collaboration with peers, industry and sector organisations, customers, governments, non-profit organisations, and society.
Today, companies are facing inevitable challenges and risks that limit their growth potential, such as scarce natural resources, bounded local purchasing power and talent shortage.
There is a clear business case to mobilise the SDGs to create opportunities and mitigate risks across four key themes: growth, risk, capital and purpose.
- Drive growth: Companies should identify how they can contribute to achieving the goals in a way that drives financial performance. While some SDGs are directly related to financial performance, many of the other SDGs also offer commercial benefits such as diversification, talent attraction and reduced operational risks.
- Address risk: Each SDG represents a risk area that is already presenting challenges to businesses and society. Investors are increasingly considering environmental, social and governance (ESG) risks in their investment decisions. Addressing these risks makes good business sense as stakeholders hold companies accountable for their role in creating or exacerbating these risks.
- Attract capital: It is expected that there would be a redirection of investment flows (both public and private) toward the global development challenges framed around the SDGs. Examples of innovative finance model towards sustainable development include climate finance and green bonds.
- Focusing purpose: Contributing to the SDGs helps to create shared value for all stakeholders. The SDGs can act as a catalyst for innovation, continuous employee engagement, exploring new market opportunities and may future proof the company against risks.
How Financial Services Sector Can Contribute To Bridging The SDG Financing Gap
Achievement of the SDG goals requires a large scale of investments and resources. The UN estimates that the cost of achieving the SDGs will be approximately US$3.3 to US$4.5 trillion per year. However, the scale of current financial flows is insufficient as private sectors are restricted by risk and return expectations, and public sectors are restricted by budgets and limited funds. How can we fill up the financing gap?
Innovative operational models, approaches and financial instruments are needed. There has been a growth of green banks and funds in developing countries, such as India’s National Investment and Infrastructure Fund (NIIF).
Green bonds are also rapidly gaining traction, and, while the growth has lagged, bonds with a similar concept such as blue bonds (e.g., for marine conservation in the Republic of Seychelles) and SDG bonds have emerged.
Financial institutions and businesses need to recognise that the SDGs may require a new way of thinking, mindset and behaviour. The SDGs are manifold and interlinked, and their achievement likely depends on new collaborations and partnerships among stakeholders. Nevertheless, useful tools and platforms such as the UN Global Compact Action Platform Financial Innovation are coming forth to help businesses understand and gain insights on innovative financing.