SDG-washing ‘a big issue’, says director of UN SDG investing initiative

SDG-washing is a “big issue” in the investment industry, the Director of the UN Development Programme’s SDG Impact – an initiative working to drive private capital to meet the goals – has said.

Speaking to RI, Fabienne Michaux questioned why progress towards achieving the UN’s sustainable development goals was slowing, despite increasing volumes of capital being labelled as ‘sustainable’. 

“When you look at the Principles for Responsible Investment, we’ve got nearly $100tn worth of capital that managers have signed up, we’ve got over $30tn of capital that’s actually labelled as sustainable finance,” she said. “But we’re going backwards at quite a fast rate at the moment, for example as a consequence of Covid, against progress of the advancement towards the SDGs.” 

“You have to ask, if you have this amount of capital that is supposedly aligned with the SDGs or sustainability outcomes, then why aren’t we seeing more progress towards the sustainable development goals?” 

A UN research report in August 2020 found that that the pandemic had disrupted efforts to achieve the SDGs and threatened to “reverse years of progress” on poverty, hunger, healthcare and education.  

Michaux also questioned the usefulness of the terms SDG-washing and greenwashing. “I think one of the challenges with the term “washing”, whatever the prefixes are, is it has quite a negative connotation that there’s intent to actually mislead”.  

“I think a much bigger issue is that there are gaps in the processes of how we’re integrating sustainability and the SDGs into management decision making. People focus on a positive intended outcome and don’t realise that in doing so, they’re missing other negative impacts that might be more material.” 

The SDG Impact initiative was established two and a half years ago to drive private capital towards achievement of the SDGs. It aims to help investors integrate sustainability into core decision making processes, and has developed a market intelligence tool which identifies investable areas which are aligned with sustainable development needs. Michaux, who spent 22 years working at S&P Global and was its Australia Country Head and Head of APAC Developed Markets, became Director of the initiative in March this year. 

In an attempt to mitigate the risk of SDG-washing, SDG Impact has developed a series of standards for investors to manage and measure their sustainable development impacts. The initiative is currently developing an independent assurance framework and an ‘Impact Seal’ to be awarded to firms who meet the standards, both of which will be launched in 2022. 

Despite her worries, however, Michaux said it was important to remain optimistic: “there’s been an amazing amount of work around different parts of the system and sustainability is a lot more mainstream in terms of discourse. I think we’re in that stage where a lot of these pieces of the puzzle are coming into view and we’re starting to see those efforts pulling together to form one complete puzzle”.  

“There’s cause to be optimistic, but cautiously optimistic,” she continued. “Markets and systems are very good at maintaining the status quo, so it’s going to take a concerted and continued effort to push forward with the agenda.”