There’s Money to be Made in Sustainability

A brief overview of finance for development, to encourage business enterprises to seek opportunity in the new global Sustainable Development Goals (SDGs)

Prepared by Juliet Downes (Barbados) December 2015

Changing the world in 17 steps – what are the Sustainable Development Goals (SDGs)?

https://sustainabledevelopment.un.org/sdgs

Why do the Sustainable Development Goals (SDGs) matter for business?

The Sustainable Development Goals (SDGs) define global sustainable development priorities and aspirations for 2030 and seek to mobilise global efforts around a common set of goals and targets.

These goals set out the complexity of improved and sustainable development in all its characteristics. The SDGs call for worldwide action among governments, business and civil society to end poverty and create a life of dignity and opportunity for all, within the boundaries of the planet.

The SDGs present an opportunity for business-led solutions and technologies to be developed and implemented, to address the world’s biggest sustainable development challenges.

Lorde Michael Hastings explains the need for SDGs and the inherent opportunities (Youtube.com)

Global sustainable development challenges already represent market opportunities for those companies able to develop and deliver innovative and effective solutions, including:

Innovative technologies to increase energy efficiency, renewable energy, energy storage, ‘green buildings’ and sustainable transportation;

The substitution of traditionally manufactured and processed products by Information Communications Technology (ICT) and other technology solutions that reduce emissions and waste;

Meeting the needs of the large and mostly untapped market for products and services – including in healthcare, education, energy, finance and ICT – that can improve the lives of the four billion people who currently live in low income environments.

Around the world, consumers are increasingly basing their purchasing decisions on their perception of a company’s sustainability performance, and the promotion of SDGs will further strengthen this trend.

Identifying future business opportunities

Where would the money come from to jump start initiatives? – the Role of Institutional Investors

What would attract institutional investors to invest in emerging economies?Investors are looking to diversify their portfolios and spread their risk. Investments in emerging markets promise high returns.

Institutional investors look for the following:• Transparent economy and well established rule of law• Better and improving economic and political institutions• Welcoming investment climate• Government’s commitment to development

Well-managed public finance benefits the economy and society via macroeconomic stability and incentives to invest, that stimulate growth. Public finance generated billions of dollars in 2013, primarily through taxes and efficient expenditure.

Measures to mobilise public funds are imperative in securing finance for development. They include:

Efficient public sector administration - Low debt to GDP ratio- Inflation in low single digits- Tight fiscal deficit 1 – 1.5 % of GDP- Good governance

Simplified and transparent tax system with facilitation of easy payments Countering tax avoidance, evasion, and illicit financial flows Proper allocation of tax dollars to public services and development needs

Mobilising domestic resources – the Role of Government

Costa Rica Public Expenditure ReviewEl Salvador Tax Reform case study

Improving the investment climate – the Role of Government

Governments play a critical role in providing a conducive investment climate through supportive governance structures, competition policy, hard and soft infrastructure, and instruments that foster healthy, commercially sustainable markets. These include:

Regulatory framework that supports open competition and well functioning labour markets

Structures for entrepreneurship and innovation Financial incentive regimes e.g. project bonds, green bonds Transferability of capitol Development of a local capitol market Mitigating risks in a way to allow private sector to participate Develop Public-Private-Partnerships to facilitate public projects and share returns

Mobilizing Private Investment for Post-2015 Sustainable Development Innovative Development Financing

Countries can’t do it alone - Role of Multilateral Development Banks (MDBs)

With the success of attaining the Millennium goals (2000 – 2015) to spur growth in developing countries, the MDB’s are redoubling their efforts to strategically unlock, leverage, and catalyse private flows and domestic resources. This is being achieved in a number of ways:

• Financial support – capacity building and improving the efficiency of the public sector• Technical assistance and policy support - e.g. advice on tax systems and spending, increasing the

dollars coming in and the impact of each dollar being spent• Act as a catalyst to mobilise financing from the private sector - e.g. in infrastructure, energy security

and efficiency, access to finance• Development of local currency in capital markets• Preparation of better projects to attract private investment with innovative returns• Risk mitigation - pooling of risks and providing guarantees• Monitoring and evaluation of development impact• Fueling the growth of SMEs

From Billions to Trillions: Transforming Development Finance

The interplay of international, public, private, and domestic finance, sets the environment for funds to support sustainable development.

Here are some examples of development financial aid supporting business participation in sustainability throughout the world:

• Credit Guarantee Scheme for Businesses (Barbados)• Energy Smart Commercial Building Retrofit Program (Canada)• Women entrepreneurship networks and grant funding (Lebanon)• Environmental grants and loans for small businesses (USA)• Rural Community Development fund (South Africa)• Green grants and funding (UK)

Sustainable Financial Programmes for Businesses

Ways in which businesses are using sustainability to increase competitiveness

Whether your business is an international enterprise, small to medium size affair or you are an entrepreneur looking to start a new venture, identifying and implementing value for money initiatives to deliver a more sustainable business, is the key to competitiveness in the current business climate.

This is highlighted in this 2011 McKinsey Global survey of 2,956 companies, which reflects the types of sustainable initiatives being undertaken and the impact on competitiveness.

http://www.mckinsey.com/insights/energy_resources_materials/the_business_of_sustainability_mckinsey_global_survey_results

Business leaders in sustainability - The case of IKEAIKEA identified that by the year 2030, the current poverty alleviation efforts will grow the middle class from 2 billion people to 5 billion people, all demanding easy, attractive, sustainable and affordable products.

So they hired a sustainability expert and weaved sustainability into the heart of their business model.

They went to work with setting targets to offer 100% sustainable products only, working with their supply chain to reduce cost - for example, helping farmers to reduce costs and increase yields by removing harmful pesticides, and employing sustainable farming techniques.

Other companies on the same path are Google, Lego, Nike and Timberland.

Steve Howard IKEA’s sustainability expert – Let’s go all the way on selling sustainability - Ted Talks (Youtube)

Get Started – the demand is growing

Choose to lead on the issues that really count – don’t hold back!

Look at your operations, where can you employ information technology /green technologies to improve efficiency and increase cost savings. Take advantage of government incentives for improvements.

How can your business fulfill a need presented by one of the SDGs and the demands of a growing population, e.g. products /services in technology, energy, health, education, agriculture, legal.

Investigate available funding in your business environment to produce sustainable products e.g. grants and guaranteed loans backed by development banks.

Take advantage of social platforms to educate clients on your sustainability initiatives.

Encourage staff to become ambassadors of sustainability.

Invest returns in new financial instruments supporting SDGs e.g. Green Bonds