SDGs and Finance – What’s to come
What does the finance sector look like right now?
There is no doubt that the finance sector, being part of the services industry, has a significant impact on our economy. In 2019, the financial services sector contributed £132 billion to the UK economy, and today provides over 1.1 million jobs across the UK (1).
It has also been one of the most resilient sectors during the coronavirus pandemic with economic output being 3% below pre-pandemic levels, as of February 2020 (1). This presents an opportunity for companies in the sector to help support economic growth, rebuild communities and show innovation when developing new products.
For businesses to benefit from this opportunity, they will need to develop a strategy that is centred around sustainable development. This is where I believe, the UNs Sustainable Development Goals (SDGs) will play a pivotal role over the next decade.
What are the SDGs and how are they relevant to us?
The goals have been defined as ‘the blueprint to help achieve a better and more sustainable future for all’. There are a total of 17 goals, which are an urgent call for action by all countries - developed and developing - in a global partnership (2).
Having worked as a sustainability professional in the finance industry in 2018, I soon learnt that the sector lacked awareness of the SDGs. What is often overlooked is the opportunities that lie within the goals, where businesses could have the most impact. I first came across the goals when researching a competitors sustainability report, and I was gripped by the way they highlighted the relevant goals, defined the measures they have in place and monitored their progress. Such a simple and clear message that they have displayed to their stakeholders, recognising their contribution so far.
The goals can work as a guide, a great tool to identify the areas of sustainable development that are most relevant for any business, not just in finance. What makes them easy to use is that every goal has a specific agenda, with a set of targets and indicators that sit beneath them.
I personally believe that the SDGs are a great fit for the finance industry as it keeps the industry accountable for their actions, with a specific focus on their ‘Triple Bottom Line’, balancing People, the Planet and Profit.
But how can the finance industry support the goals?
I mentioned earlier the opportunities that could present themselves for the finance sector by aligning their strategy with the SDGs. From my experience and using the ‘Sustainable Development Goals Industry Matrix’ by KPMG(3), I have outlined the 4 key themes that group together market potential, societal demands and policy action, as well as giving some examples.
What I believe to be most relevant in the current climate is access to finance, tackling the barriers to financial inclusion and increasing efforts to support Goal 1 – No Poverty. This is important across the globe, but the aftereffects of COVID 19 will present a significant challenge in the UK. One example of these challenges would be the efforts to support rough sleepers, with councils and governments providing accommodation in hotels, but this is only a temporary fix. New innovative products and businesses in the finance industry taking responsibility of the challenge ahead needs to be at the forefront of their strategy, to make long lasting sustainable change.
What’s to come?
In the FTSE350, there are some positives in the movement towards aligning business strategy with the SDGs for finance companies. ‘Support the Goals’, an initiative that rates businesses that support the goals, revealed a significant improvement in the finance industry, where the proportion of stars awarded increased from 36.84% to 70% between 2018 and 2020 (5)
As awareness of the goals and sustainability in finance increases, integrating this into your business will no longer be a nice to have. We can already see that new regulations and external requirements are coming to surface, as well as rating platforms that can have a significant impact on your business reputation.
In my opinion, the finance sector is a key influencer in the world of sustainability. The industries and organisations that the finance sector is linked to is vast, and they could act as a catalyst to accelerate progress in making the SDGs 2030 agenda a reality. So, for those working in the finance sector, does your business strategy align with the UNs SDGs, or even sustainability in general? Are you doing enough?