The United Nations Global Compact released their "Driving Progress: Sustainable Finance for the Advancement of the SDGs" report on Monday, detailing the gap in investments needed to reach the U’'s Sustainable Development Goals (SDGs). The UNGC identifies that this financing gap has grown in recent years, ballooning to an annual figure of $4 trillion USD. Despite this deficit, sustainable investments have outearned traditional models, highlighting the business case to integrate SDGs into long-term operational plans.
Why It Matters
Sustainable Finance: Sustainable investment funds have outperformed traditional funds over the last 5 years by a median of 4.7%, highlighting the value of continued sustainability commitments despite political turmoil.
Private Sector Involvement: Contributing 60% of global GDP, private businesses are crucial in efforts to reduce climate impacts, yet only 24% of companies regard integrating the UN’s SDGs into their investment criteria as a high priority over the next 5 years.
Investment Urgency: The annual SDG financial gap has continued to grow, increasing by 60% since 2014, underscoring the need for meaningful contemporary action.
Risk Management: Every $1 invested in climate resilience reduces disaster recovery costs by $7.
Details
The United Nations’ 17 Sustainable Development Goals came into effect on January 1st, 2016, as a core part of the 2030 Agenda for Sustainable Development. Almost one decade later, investments and global efforts have fallen short.
Global investments to achieve the SDGs are distressingly insufficient, and with current trends, this appears unlikely to change. Annual investments are $4 trillion short of the requisite amount to achieve the 2030 agenda. The political climate in the US is outwardly hostile to sustainability efforts, making it even more likely that this gap will continue to grow.
Despite this lack of investment, the economic case for investing in sustainable development has never been clearer. Sustainable investment funds had a .6% higher return in 2024 and have had a median 4.7% higher return compared to traditional funds. Additionally, every $1 invested in climate resilience reduces disaster recovery costs by $7.
So companies should be racing to invest sustainably, right? This is unfortunately far from the case as only 24% of companies have prioritized integrating the SDGs into their investment strategies. But if there’s a clear financial incentive, why aren’t companies chasing profits. 80% of companies acknowledge a business case for one or more SDGs, but almost 90% are concerned about the long payback period of the initial investment.
Financial assistance to mitigate short-term negative impacts such as low-or-no-interest rate loans from government entities has the power to overcome these barriers. While climate-friendly regions may be able to offer these policies, the US appears poised to actively restrict the ability for business-government collaboration.
The news isn’t all bad though. Citi has committed to financing and facilitating $1 trillion USD to support climate and social initiatives by 2030. Citi’s efforts have prevented 6 million tons of greenhouse gas (GHG) emissions, created 2.6 million jobs, and helped over 61 million people globally. Their Green Bond Portfolio specifically has prevented over 19,000 tons of CO2 emissions annually, saved 310 MWh of energy each year, and funded over 600 affordable housing projects.
Progress towards the UN’s SDGs has not been enough, despite the fact that it is economically beneficial to invest in sustainability. New incentives are necessary to drive the requisite financing to achieve these goals as the annual funding gap continues to grow, year-over-year.
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