$50trn Question: Emerging markets at risk as UN Sustainable Development Goals face critical investment shortfall

By Charles Abuede

• Only 13% of $50trn investment linked to UN SDGs, StanChart study shows

A recent study by Standard Chartered, a leading international banking group, with presence in 60 of the world’s markets, has revealed that the United Nations (UN) Sustainable Development Goals (SDGs) are not getting the needed investments to aid the world in meeting with critical targets for fighting poverty and climate change by the year 2030.

The survey, conducted among the world’s top 300 investment firms with total assets under management (AUM) worth $50 trillion, found that only 13 per cent of the $50 trillion worth of investments is linked to the UN SDGs, while the lack of investment in emerging markets puts the chances of meeting the 2030 SDG deadline at risk.

Meanwhile, 20 per cent of the total 300 investment firms is unaware of the United Nation’s Sustainable Development Goals.

According to the study, which is focused on sustainability, 81 per cent of investment firms are now taking a disciplined step to investments in environment, social and governance, though, this does not translate into investment in the development goals by the United Nations as only 13 per cent of the assets managed by these firms globally are directed towards SDG-linked investments.

The covid-19 pandemic may have hampered the possibility for emerging markets to get the investments they need as almost 70 per cent of investors believe the pandemic has further widened the capital gap. Similarly, the Standard Chartered study pointed out that about 64 per cent or two-thirds of the total assets under management is invested in the developed markets of North America, Asia and Europe, which includes a number of developed markets with 22 per cent. On the other hand, emerging markets received just 2 per cent for the Middle East, 3 per cent for Africa and 5 per cent for South America, of the invested assets, respectively.

This massive shortfall in investment into the emerging markets contrasts with 88 per cent of investors who said that investments into the emerging markets have outperformed developed markets over the past 3 years.

However, the perceived risk posed by the emerging markets stands as a major barrier to investment within the regions; although, more than two-thirds of investors believe that emerging markets are high-risk compared to other 42 per cent with the same believe for developed markets.

Asserting to the statement of Simon Cooper, Standard Chartered CEO, corporate, commercial and institutional banking, “Much progress has been made in recent years to realise the SDGs, but a seismic, unprecedented surge in private-sector investment – alongside public investment and commitments – will be required to bridge the gap and hit the 2030 SDG targets.

“There is no single answer to the $50 Trillion Question, but it is evident that investors need to expand their focus beyond developed markets if we are to achieve these goals. Emerging economies offer investors a unique opportunity: strong returns combined with the chance to have a significant, positive impact. Now is the time to seize it,” Cooper stressed.

Meanwhile, assets managers have pointed to favourable tax treatment, evidence of higher returns, regulatory changes, and improved demand from retail investors and better data for appraising investment impact as the major factors that might spur on more sustainable development goals (SDGs) investment.