“The private sector has a key role to play”

The United Nations hopes to generate momentum for international efforts to achieve sustainable development through the Sustainable Development Goals (SDGs) that it adopted in 2015. Sustainability expert Georg Kell explains in this interview how the financial sector can contribute to the SD Gs.

The Sustainable Development Goals are directed primarily at countries and less at companies. What can the business world do to help implement the SDGs?

Georg Kell:

The international community naturally needs to agree on the major goals, but from the outset, the private sector was a driving force behind the development of the SDGs. After all, what’s at stake are basic values such as openness and respect, and how to facilitate trade, investments and the free exchange of information based on those values. Due to some dark clouds gathering on the political horizon, companies have an especially important role to play now more than ever. We need policies that enable markets to flourish. Whether we are talking about climate change or water use, everywhere you look the SDGs are a motivating factor for the common search for solutions.

What is your view on the role of the financial sector and its responsibility?

Kell:

After years of scepticism, it’s been apparent for two or three years now that the financial world is dealing more consciously with sustainability. Some financial companies have even moved over to the fast track or are in the process of doing so. Not all too long ago, banks regarded sustainability issues as highly abstract and rather morally motivated. However, now that sustainability information is becoming more and more quantifiable, the financial community is increasingly recognising that sustainability is absolutely an important matter that harbours opportunities for growth. The measurability of non-financial indicators when assessing opportunities and risks can now really drive this movement forward. As a result, it will be possible to increasingly direct capital flows into those areas that benefit sustainability.

What triggered this movement?

Kell:

I see three megatrends. The first one is information and transparency. Using these tools, we are now able to prove the economic benefits of sustainable behaviour, for example with regard to water management. The second one is that social attitudes towards the use of natural resources have changed dramatically in the last 10 to 15 years. Public goods, such as air and water, are now seen as valuable. The link between clean water or air quality and matters of health or quality of life is growing more apparent. And the third megatrend relates to those changes that many markets and societies are subject to. Consumers are changing and demanding greater customer focus as well as opportunities for individuals to make their own choices. Issues of sustainability also matter in this process, because they speak to many peoples’ attitude towards life and a sense of appreciation.

Which of the 17 SDGs are especially relevant to the financial community?

Kell:

Major issues for the financial sector particularly include energy, cities, infrastructure and climate change. A lot of action is already being taken to address these concerns, but we will continue to see great need for financing in order to put new solutions into practice.

Isn’t it also possible to implement the goals within the companies themselves?

Kell:

Absolutely. The SDGs represent first and foremost a joint roadmap or blueprint for the positive development of humanity. Many goals are well suited to use in companies’ in-house efforts. Companies should take a close look at the SDGs and identify those goals where they could make the greatest impact or which fit well with the business model. For example, education and gender equality are key issues that every company can improve on.

In your view, are there certain bank-specific tools for advancing sustainability goals?

Kell:

I think there are two major trends in this area. One is a topical focus, specifically the impact investment movement. As part of this movement, loans and investments have to have demonstrable social or environmental benefits. We are seeing a lot of action on this at the moment. The other trend is the systematic integration of environmental, social and governance criteria into all investment decisions taken by a financial institution. These integration efforts are already well under way, and I think the movement is on the verge of a breakthrough. The two movements are complementary. The first one is projector topic-specific, while the second one is systemic and aims to have an overall positive impact on markets.

How do you rate the performance of German companies?

Kell:

Germany’s actual strength when it comes to sustainability issues is in engineering. It’s a national economic strength that Germany, with its large number of SMEs, knows how to exploit in the global field. Many of these SMEs definitely grasp that sustainability is a competitive advantage. Business and economic trends such as the circular economy and the increasing decentralisation of energy supply are phenomenal. The financial community can also support these strengths. In my view, doing so represents a tremendous opportunity to restore trust and gain an economic foothold. In the process, it is necessary to recall and return to the country’s original strengths, because Germany is perfectly positioned.

Georg Kell is a co-founder of the Global Compact and served as its Executive Director from 2000 to 2014. The Global Compact is a United Nations network for companies and businesses. He currently serves as Vice Chairman of the German-British investment firm Arabesque Partners, which specialises in sustainable investing as based on a proprietary research approach.