Socially responsible investments and sustainable development goals
Abstract:
The Sustainable Development Goals (SDGs) as a global sustainable development agenda provide guidance on what sustainable trends are relevant to the financial community.
Investors have responded by integrating Environmental, Social and Governance (ESG) factors into their decisions – Socially Responsible Investing (SRI) – improving performance in this area through active ownership and availability of assets for thematic investments. According to the Global Sustainable Investment Alliance (GSIA)[1], at the beginning of 2020 the value of sustainable investments in the main global financial markets was 35.3 billion dollars, representing 36% of all assets managed across the world.
It is important to establish a common language to identify green investment opportunities and measure the growth and performance associated with these businesses. The European Union (EU) sustainability taxonomy is considered the backbone of the European Commission’s green finance package. Its objective is to develop a robust classification system to identify and catalog investment opportunities that significantly contribute to environmental objectives, minimizing negative impacts in all areas, including social ones. In this way, investors are expected to redirect capital flows towards green investments in order to achieve sustainable and inclusive growth.
However, there are several challenges that arise:
-standardization and parameterization of the way of reporting sustainable practices led to the development of an international reporting method (Global Reporting Initiative);
-provide investors with information on the environmental performance of their assets and economic activities;
-avoid greenwashing practices in which financial products are labeled as “green” or “ecological”, despite the lack of credentials and truly sustainable impact;
-consider sustainability as a driver of economic profitability to the detriment of the predominance of the reputational aspect of companies.
Companies will have to increasingly improve their transparency on issues related to the SDGs. Attention will focus on cases where the information is linked to financial materiality, so standardization and legislative/regulatory initiatives will continue to define requirements for companies to improve their disclosures and the management of their social and environmental impact.
The theme based on concepts associated with sustainability, brings with it discussion and reflection with society, but, above all, opens space for the adoption of policies and measures that meet current concerns. This qualitative and descriptive article aims to contribute by analyzing the interdependence between the SDGs and responsible investment through the creation of normative references that promote the integration of sustainability considerations ESG practices in decision-making institutional investment decisions and financial management, seeking to align the global financial system with the Sustainable Development Goals.
[1] Global Sustainable Investment Review 2020, Global Sustainable Investment Alliance (GSIA).
António Augusto Baptista Rodrigues has received a PhD from the Faculty of Sciences Economics and Business – Sevilla University – Spain.
Is a ESG Advisor Sustainable Finance from European Financial Planning Association.
Is currently Associate Professor in ISG – Business & Economics School and Investigator at de Cesop of the University Católica Portuguesa. Your research interests are in the areas of management, sustainable finance, entrepreneurship and territorial marketing
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