Impact investment deals and strategies are focused on narrow areas and missing many of the UN’s Sustainable Development Goals (SDGs), according to a new study.
A paper by Syrus Islam and Asheq Rahman of the Auckland University of Technology in New Zealand found that most impact investment deals were linked to just four of the 17 SDGs.
The researchers assessed 292 impact investment deals using data from US-based impact investing platform Abaca, linking them to relevant SDGs. The shortfall in support for most of the goals revealed a “significant SDG-dealflow gap in the impact investing market”, they said.
In addition, the researchers found that most investment deals linked to the SDGs were “highly concentrated in only two regions”, implying a “significant imbalance” between the SDGs, invested capital, and the regions in which the two meet.
“Our analysis shows that most investment deals are directly or indirectly linked to only four SDGs: SDG 1 (no poverty), SDG 2 (zero hunger), SDG 3 (good health and well-being), and SDG 8 (decent work and economic growth),” Islam and Rahman wrote. “As a result, many other SDGs are relatively underrepresented in the available impact investment deals.”
“Furthermore, most investment deals directly or indirectly contributing to the SDGs are highly concentrated in two regions — US and Canada, and Sub-Saharan Africa. Also, many emerging regions (e.g. Southeast Asia, the Middle East and North Africa) have a severe shortage of impact investment dealflow.”
The researchers called for more work to be carried out on specific areas of SDG-related investment to better understand the imbalances identified. This included expanding the universe of available data, exploring how the less-invested SDGs could be supported, and assessing the possibility and scale of “unintended consequences” from impact investing strategies.
At a meeting of G20 finance ministers and central bank governors on February 24 and 25, attendees reached an agreement calling for the G20’s Sustainable Finance Working Group to develop a framework for making the SDGs investable.
In a statement, the G20 said the work should initially “focus on nature-related data and reporting and social impact investing, taking country circumstances into consideration”.