Investors can have a big impact on changing companies for the better, but a narrow focus on climate can have unintended consequences, according to researchers.
Analysts at Impak Analytics say the sector's focus on tackling climate change has led to a neglect of other critical environmental and social issues, which are all interconnected.
A failure to comprehensively address environmental and social risks hinders progress toward achieving the UN's global sustainable development goals and can be harmful to overall financial stability, say Velina Serafimov and Marion Bitoune, chief impact officer and ESG research manager at Impak Analytics respectively.
The Canadian-French impact rating agency recently published a study on sustainability reporting and SDG alignment among STOXX 600 companies.
FTAdviser In Focus has spoken to Serafimov and Bitoune about what they make of what they found.
FTA: What are the UN’s global SGDs designed to achieve and what role do businesses play in ensuring this is achieved?
VS & MB: The sustainable development goals were created by the UN in 2015 as a roadmap to achieve a more sustainable and equitable world by 2030, featuring 17 goals and 169 targets addressing the most urgent global challenges across social, economic, and environmental domains.
Achieving them requires annual investments of $3.3-4.5tn (£2.7-3.7tn), a task beyond governments and public financing alone.
Our research shows that presently 15 per cent of SDG targets progress as intended, while 48 per cent show insufficient progress, and 37 per cent stagnate or regress. In this context, the private sector emerges as a pivotal stakeholder.
FTA: What role do companies play in the global effort to achieve these targets?
VS & MB: Viewing companies solely as drivers of economic growth and job creation in achieving the 2030 agenda oversimplifies the situation.
Companies generate employment, but the labour conditions of that employment determine whether there is a true contribution to the SDGs.
Therefore, it is critical to consider how business is done to achieve the SDGs and what role they have to play to contribute to global sustainability.
Firms should advocate for SDG-supportive policies, raising awareness among stakeholders.
FTA: To what extent is this being achieved?
VS & MB: During the 2023 SDG Summit in September, leaders voiced their commitment to this vision and acknowledged their crucial role in its achievement.
However, our analysis underscores that businesses are falling short of fulfilling these roles; the actual implementation of actions lags behind the public pledges and the level of ambition.
Despite a notable increase in business engagement during the initial seven years of the 2030 agenda, the pace and scale of this involvement still need to be aligned with the urgency of the SDGs.
