Key points in a nutshell:
- SDG investing focuses on investments that contribute to achieving the UN’s Sustainable Development Goals (SDGs).
- The SDGs are 17 global goals for sustainable development defined by the UN that serve as a framework for measuring the sustainability impact of companies.
- The SDGs cover various themes such as poverty alleviation and climate change mitigation.
- SDG investing provides investors with a number of advantages, such as the opportunity to invest in companies that have a positive impact on nature and society.
- There are various ways to invest in the SDGs, including through radicant's SDG-aligned investment products.
1. What is SDG investing?
The Sustainable Development Goals (SDGs) were adopted by 193 UN member states in 2015. They cover 17 global goals aimed at promoting sustainable development around the world.
Each of these 17 goals is associated with specific subtargets highlighting challenges and aspects to address in various areas, ranging from ending hunger and eradicating poverty to combating climate change and promoting education for all.
In SDG investing, the SDGs serve as a guide and benchmark for investors to assess the extent to which their investments contribute to the global sustainable development goals.
It's important to note that SDG investing considers the holistic impact of investments on various SDGs. For instance, a company in an SDG-oriented fund might contribute positively to SDG 7 (Affordable and clean energy) through its innovative solar energy solutions.
However, if the company's production of solar cells and material sourcing neglect labour rights, negatively impacting SDG 8 (Decent work and economic growth), both aspects need to be considered.
Tips from us: At radicant, our SDG-aligned funds consider the impact of companies on the SDGs from all angles. This ensures that your money is genuinely invested in a sustainable way and contributes positively to achieving the UN's 17 sustainability goals.
Want to learn more? Then visit our investing page.
2. How does SDG investing differ from ESG investing?
ESG investing and SDG investing primarily differ in their objectives. While ESG investing focuses on minimising the environmental and social risks to a company (known as "single materiality"), SDG investing also considers a company's direct impact on these issues, such as climate action (SDG 13).
This broader concept is known as "double materiality." It's a central concept in the Sustainable Finance Disclosure Regulation (SFDR) and EU regulation for sustainable finance. SFDR categorises funds based on their environmental and social characteristics into three levels:
- SFDR Article 6: Non-sustainable funds with limited consideration of ESG risks in the investment process.
- SFDR Article 8: "Light green" funds that consider sustainability risks and promote environmental or social characteristics.
- SFDR Article 9: "Dark green" funds that consider sustainability risks and pursue a specific sustainability goal alongside financial objectives, contributing to environmental or social goals.
At radicant, SDG-aligned investing adheres to the concept of "double materiality." Beyond financial returns, our SDG-aligned funds explicitly pursue a sustainability goal. They all fullfil the SFDR Article 9 criteria and exclusively invest in companies that have a proven track record of contributing positively to the achievement of the SDGs and the sustainable development of our planet.
3. What are the benefits of SDG investing?
SDG investing offers numerous opportunities. It allows you to invest in companies actively making positive contributions to the environment and society. With the world facing diverse issues like climate change, the loss of biodiversity, gender inequality, and water scarcity, there's a significant annual funding gap of USD 6 trillion to achieve the SDGs, out of which 77% is unmet.
This highlights the increasing importance of private capital and corporate responsibility. To address these challenges, investments in solution-oriented companies are essential. Just as buying organic products supports their mission in supermarkets, investments in such companies bolster their efforts.
As these global challenges also represent economic opportunities, the demand for corresponding companies is likely to grow in the coming years. Especially when governments and regulators respond more assertively, such companies are set to thrive and capitalise on their contributions to the SDGs and their future-proof models.
4. Conclusion: How can I invest in the SDGs?
There are various ways to invest in the SDGs, but it's important to note that many investment approaches lack a holistic impact measurement. For example, an investment fund focusing on water or climate action may have a positive influence on its associated SDG 6 or SDG 13 but at the same time have a highly negative impact on other SDGs – a situation that definitely should be avoided.
SDG measurements often simplify the impact assessment by only associating revenues to the SDGs, while overlooking operational processes, supply chains or controversies.
This calls for comprehensive impact measurement, and this is where radicant comes in. With radicant, you can invest in companies that contribute to achieving the SDGs, ensuring a positive impact on our planet and society.
Our rating system guarantees investments in companies making measurable contributions to a sustainable future, ensuring the highest level of transparency. Furthermore, thanks to our experienced portfolio managers, your money is invested sustainably, diversely and professionally – starting from as little as CHF 1,000.
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