By Marie Lassegnore, CFA, Head of Sustainable Investments, La Française AM
Encompassing areas such as poverty eradication, climate change, gender equality and sustainable economic growth, the Sustainable Development Goals (SDGs) represent a shared global vision for a more inclusive, equitable and sustainable future. According to the latest SDG Report, progress is slow or even in decline. Indeed, only 15% of the Sustainable Development Goals are in line to be met by 2030 while progress is stagnating or even retreating for a majority1.;The main cause highlighted is the lack of funding and private capital allocation to the Sustainable Development Goals in the current post Covid, hyper inflationary environment.
To provide perspective, the funding gap of €4,000 billion per year in 2020 now exceeds €10,000 billion2. This is all the more alarming given that the 2030 deadline is approaching at alarming speed and the environment is becoming more complex. Just look at SDG 3 “Good health and well-being”, where the situation has deteriorated with 50% of the world's population lacking access to essential health services3. More than 380 million people were pushed even further into extreme poverty due to health spending in 20194.The infant immunization rate is another hard fact. It has seen its largest decline in 30 years along with an increase in mortality from tuberculosis and malaria compared to pre-Covid5. To compensate, private sector capital will need to be directed towards financing health, thus also contributing to a sustainable future.
The role of the private sector is essential in identifying stakeholders, active in ensuring healthy lives and promoting the well-being of all, especially given global population growth which will exacerbate socio economic inequalities. The world's population in 2050 is estimated at nearly 10 billion6, which for developed countries, translates into a health budget equal to 14% of GDP, compared to 6% today7. Redirecting private capital towards health would bridge the financing gap while creating investment opportunities. For example, investing in vaccine R&D, as was done during the period running from 2015 and 2022, would generate an economic profit of over €1,300 billion by 20308. The telehealth sector is yet another example, for which an average annual growth rate of 20% is expected between 2023 and 20309. And the list goes on.
SDGs in the Investment Landscape
Integrating SDGs into investment decision making processes would allow investors to benefit from performance prospects while generating positive social and environmental results. There are many opportunities combining performance prospects with positive contributions: for example, a US biopharmaceutical company specialised in the treatment of rare diseases. Its goal is to approve at least five new products, for unaddressed patient needs, by the end of this decade. The company provides grants for medical education and supports public policy initiatives that improve access to care and health equity measures. It also provides a free drug program for eligible uninsured patients in the US. Over the past five years, it has achieved revenue and operating profit growth of +20% and +14% per year, respectively.
Another example is a global leader in bioanalysis. The group operates clinical diagnostic laboratories and offers quality control services for the environment, food, pharmaceuticals and cosmetics. The growth prospects on these segments are significant, with a projected +8% per year over the next ten years for food and environmental tests and more than 10% per year in bio pharmaceuticals. In addition to supporting health, the company provides a wide range of environmental analytical capabilities. In agriculture, for example, the company offers a new suite of soil carbon testing to help transition to more sustainable practices.
The private sector is a key partner in pursuing the Sustainable Development Goals. Leveraging on its strengths in terms of agility, innovation and investment capabilities, the private sector has the potential to drive transformative change. Through funding, companies can align their strategies and operations with SDGs and generate positive social and environmental impacts while opening new venues to sustainable growth.
The commentary is provided for information and education purposes only. The views are expressed by the La Française Group. These views may differ from those of other investment professionals. Published by La Française AM Finance Services, whose registered office is located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de contrôle prudentiel as an investment services provider under number 18673 X, an affiliate of La Française. La Française Asset Management has been authorised by the AMF under number GP97076 since 1 July 1997.
sources
- https://unglobalcompact.org/news/5143-09-14-2023
- UNGC _ SDG _ Stocktake _ Report _ 2023
- Report of the World Bank and the World Health Organisation (WHO), 2017
- UNGC _ SDG _ Stocktake _ Report _ 2023
- UNGC _ SDG _ Stocktake _ Report _ 2023
- 9.7 billion on Earth by 2050, but growth rate slowing, says new UN population report | UN News
- OECD Health Statistics 2023
- UNGC _ SDG _ Stocktake _ Report _ 2023
- Bloomberg, Exclusive report on Telemedicine industry, April 2023