report

A pilot scheme is being developed to massively increase the flow of private sector capital to achieve the United Nations’ sustainable development goals.

A major new report has concluded that ‘business-as-usual’ in the financial services sector will not deliver the 2030 target to achieve the Global Goals.

With sustainability and impact quickly moving from being specialist subjects to being core drivers of investment strategies worldwide the report calls for a ‘step-change’, identifying a private equity fund-of-fund solution that provides the required scale to attract new capital from institutional investors. The new independent managed platform, a global impact fund-of-funds, will fill the gap between specialist impact fund managers and mainstream investors.

The proposal is designed to attract global institutional investors who otherwise would not deploy tens of millions of dollars in this space, ensuring they receive a financial return at the same time as delivering an authenticated positive social and environmental impact.

Detailed due diligence for a pilot scheme will now take place following a virtual workshop held this week organised by the Global Ethical Finance Initiative and UNDP and involving fund managers, asset owners and specialist impact investors.

The pilot is due to be launched at the COP26 climate summit, currently scheduled to be held in Glasgow in November.

The project comes after a two-year collaboration between the United Nations Development Programme (UNDP) and the Scottish Government, with work led by the Edinburgh-based Global Ethical Finance Initiative and analysis in the report conducted by merchant banking group R.J. Fleming & Co.

A copy of the report, ‘Mobilising Private Sector Capital in Support of the UN Sustainable Development Goals’, can be read here.

Omar Shaikh, managing director of the Global Ethical Finance Initiative, said:

“Having consulted almost 100 representatives from a cross-section of investment professionals and asset owners, representing total assets under management of over US$21.5 trillion, we have undertaken one of the most comprehensive contemporary reviews of the appetite amongst the global investor community for supporting the SDGs and ESG aligned investing.”

“By developing a deep understanding of the challenges investors face in this space we have identified a long-term, private markets solution that we believe will remain attractive despite the economic downturn. Current market conditions present significant opportunities as cash is at a premium, especially for small to medium-sized businesses.”

Jamison Ervin, Manager from United Nations Development Programme, said:

“There is an asymmetry between the availability of supply of private sector finance and the supply of investment-ready projects.”

“Our goal in this partnership is therefore to explore and test new ways of channelling finance to focus on inclusive, nature-based, SDG-aligned enterprises.”

“We are excited to support the development of a new, innovative finance instrument that will help accelerate the deployment of private sector financing where it is most needed.”

James Dauman, Managing Director from R.J. Fleming & Co. said:

“In these uncertain and troubled times, the need to support the SDGs has perhaps never been greater. We are remain fully focused on delivering capital towards making a meaningful positive impact whilst at the same time generating market-rate investment returns.”