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Opinion | Why a world awash in green investments can’t find the money for sustainable development goals
- Funding for UN SDGs are short of US$2.5 trillion every year despite global green investments topping US$30 trillion
- More clarity is needed on what counts as ‘sustainable investment’ as well as greater transparency on the activities of financial institutions
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Over the last decade, sustainable investments have gone mainstream as investors shun fossil fuels and seek out green bonds and environmental, social and governance (ESG) investments instead. Green investments estimated to be worth more than US$30 trillion now occupy the centre of financial markets. Despite this, the UN Sustainable Development Goals (SDGs) financing gap is as large as ever.
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The world is awash in capital. With global financial assets valued at US$900 trillion, there is plenty of capital to go around, and interest rates have been low since the 2008 financial crisis. Yet in the midst of such favourable investment conditions, the much-needed SDG financing for a more sustainable future is still short of US$2.5 trillion every year.
This can only be because sustainable investors do not put their money where it is most needed; given that, how “sustainable” are these investments?
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The most efficient way of meeting SDGs is to invest where the marginal benefit is greatest – in essence, where SDG performance is worst, and the financing gap the biggest. Both Africa and Asia report the worst SDG performances; in particular, developing Asian countries have both the worst performances and the largest financing gaps.
For example, Asia has an annual infrastructure investment gap of US$900 billion. This money is needed for economic infrastructure such as transport, energy and water, as well as for social infrastructure such as education and health.
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