Capital markets that are aligned with sustainable development can be instrumental in filling the financing gap for the Sustainable Development Goals (SDGs). The pursuit of sustainability in business operations and investment has led to a proliferation of sustainability-themed financial products in recent years, which integrate environmental, social and governance (ESG) considerations and the Sustainable Development Goals (SDGs) into their asset allocation process. The global efforts to fight the COVID-19 pandemic and climate change are accelerating this momentum, with a surge in climate and social funds and bonds.
These sustainability-oriented funds have become important instruments for institutional investors to invest in sustainable development, channeling billions of dollars into key sectors that are critical for achieving the SDGs.
"Despite their rapid growth, the total assets of sustainable funds account for 3.2% of the entire fund universe, and most of them are domiciled and invested in developed economies. Meanwhile, a lack of transparency and inconsistency of standards around sustainability labelling have given rise to credibility issues and “ESG washing” concerns.
One of the action areas of the UN Global Sustainable Finance Observatory (GSFO) is to conduct sustainability assessments and ranking of “self-claimed” sustainable products on the global capital market, and identify best performers while disclosing exposure to climate and other risks.