Speaker 0:
Hi. My name is Omar Sheikh. It's great to be back here at Asset TV as part of our path to cop 28 campaign. This is part two of our four part series we're doing together with Asset TV and today we're going to be talking all things around the UN sustainable development goals. The S D. G s are 17 global goals that the United Nations General Assembly set in 2015 for the year 2030.

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They address the global challenges we face such as poverty, inequality, climate, environment, degradation, prosperity, peace and justice. And this is the first time that the private sector has been called on to play a pivotal role in achieving this global development agenda. This goes beyond charity.

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It's about exploring new business opportunities and defining new ways of doing business that aligns our economic growth with positive environmental and social impact.

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According to the better business world, achieving the S d. G s could open up up to an estimated $12 trillion of market business opportunities. We are seeing an increasing number of financial institutions incorporating the S. D. G s into their products and into their reporting

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from B that be on the debt capital market side. We've seen a issue the world's first sovereign fixed income S D G fund, which we'll hear more about today, or H S BC, who were amongst the first to issue an S D G Bond raising a billion dollars in 2017. And on the equity capital market side, we've seen Hermes S D G engagement fund being launched in 2018 that targets companies believed to contribute positively to societal impact. Aligned with the S. D. G s.

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Aberdeen also has issued a fund which uses the goals as a key part of their investment philosophy for the Emerging Market Sustainable Development Equity Fund. They believe several themes and sectors that could benefit as investors apply the S D. G s to Asia and emerging markets. On the banking side, we've seen the S. D. G s sit at the heart of the UN principles of responsible banking.

Speaker 0:
So can the S. D. G. S create tangible opportunities for companies to make a positive contribution to society and the environment while simultaneously, uh, enhancing the long term financial value of their business. That is the question that we'll be exploring today,

Speaker 0:
and I'm delighted to be joined by two excellent experts to unpack the S D. G s in finance. So it's great to have Irena with me from a and A with me from i n g. Welcome to both of you. Thank you for joining us. Good to be here. Great. So starting with yourself, uh, Ari, tell us a bit more about your role and how you see the S D. G s.

Speaker 0:
So I'm a Mugabe. Uh, i n g s UK lead for sustainable finance. I work closely with I n g s clients to integrate sustainability into the financing. Uh, we provide,

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um, by background. I'm also an infrastructure financier. So I financed assets such as, you know, ports, roads and utilities. And infrastructure, of course, is at the heart of a well functioning economy and society. And many of the things that drew me to infrastructure have also led to me developing a passion for sustainability.

Speaker 0:
And, you know, one of the things that really interests me is, you know, how do we decouple growth and prosperity from further, you know, adverse social and environmental impacts. So, overall, I think throughout my career. I've been working in some capacity towards the S D G SI. Think you make a very good point there about the role of infrastructure and and that decoupling from continuing growth, uh, to to the negative

Speaker 0:
impact on our environment a planet with limited resources, as we all know Very well. IRITA. Tell us more about yourself. Your role? Uh,

Speaker 1:
yes. So my name is Irina Kura. I work as a portfolio manager at a asset management. Uh, so we work with a wide range of clients and we work globally. So we see the whole landscape of responsible investing And

Speaker 1:
how many clients actually struggle with, you know, defining how actually, you should invest your money in a responsible manner. And now we see how a lot of regulations coming to the market. But still, the world of E s G and sustainability is sometimes very confusing. Uh, so we see the S. D. G framework as actually very helpful as defining what is sustainable and how you s investor can contribute to those goals. So, um,

Speaker 1:
you mentioned that indeed. We launched the the fund that is linked to S. D. G s and we see that that framework is really useful for private sector and individuals to kind of mobilise the the money that are needed to achieve those goals.

Speaker 0:
Great. Fantastic. And, uh, it really is, as you say, I an increasing challenge is how do you integrate all this sustainability stuff? So

Speaker 0:
s D. G s. When they started, everyone thought this was a government agenda. It's not for private sector that's very quickly changed. So at a day to day level, I said, welcome your thoughts as to how do you encounter the S D. G. S

Speaker 0:
so day to day in my engagement with, uh, clients. I frequently review their sustainability reporting, and we see S d. G s used as as a way to frame a company's, uh, sustainability, um, efforts. And under those s g g s, we often see some form of quantified metrics to track performance against those factors.

Speaker 0:
Um, but also from a sustainable finance perspective, there are two key products that we use to drive positive change. One are sustainably linked products where we link the cost of financing to a company's sustainability performance, and the other one is use of proceeds products where the financing we provide is used for green or social investments. And we see with those two products that often the financial objectives are mapped to the S. D. G s.

Speaker 0:
And we see the S. D. G s as a really helpful common global language to convey to investors the intended positive outcomes of those financing products. And that's a that's a very interesting point. And are you seeing that increasing over the last 24 months, this utilisation of the S. D. G. S as a common framework? I'd see it for the long term when companies were trying to think, How do I best start with my sustainability strategy?

Speaker 0:
It's always best to start from certain frameworks which are well understood by your stakeholders. And I find that the S T. G is being a UN driven.

Speaker 0:
Um, you know, as initiative, it is often a great place to start. So So I think it's been more than just the last 24 months. At least for the last five years, I've seen those s D. G s form A a cornerstone in in standards reporting Fantastic and the S. D. G s, as we know, are 17 goals, but they also have 100 and 69 targets and 200 plus indicators. So it's really useful. As you were saying, that metrics can actually be utilised underpin the S D. G s as well. And I Irena, what about yourself?

Speaker 1:
Yes. So, uh, let's say, as an asset manager, of course, we are looking for ways to help our clients to, you know, achieve their sustainable ambitions in their investments. So we do have a set of solutions on the responsible investment side that either directly link with S. D. G s or help clients to map certain, uh, capital flows to, uh, S D. G s.

Speaker 1:
Uh, but as you mentioned, indeed, they were created for government. So for some asset classes, it is easier to integrate. But, uh, we do see the role for private capital, of course, to helping to achieve those goals. And there are, of course, some products where we can claim direct impact. So usually this is like impact funds and, let's say, more private investments.

Speaker 1:
But through through public markets, there is still a lot of let's say room to communicate those goals. So I I agree that it is a very useful tool to kind of set the expectations right, because, um, you know it. It is so broad, that

Speaker 1:
topic of sustainable investment that that you can get lost in actually what targets are important or what indicators to follow. And having this framework, you know, really helps you to set expectations with external stakeholders with internal reporting procedures. So

Speaker 1:
I think that the the true value is that it really helps, you know, to to manage expectations and have clear understanding of what we are trying to achieve. Actually,

Speaker 0:
that's really interesting. Irena, was there a moment when amongst the senior management at a When you thought Well, actually, you know, the S D. G. S are critically important, and we want to use these.

Speaker 1:
Well, I think that, let's say, on the investment specialist side, uh, it was through the discovery that if you just stick to let's say E s g landscape, sometimes you end up with, uh, definitions that are not aligned with what your clients want to achieve. Uh, from the management point of view, I guess it is more about the communication. Right? So how are you setting up the, uh, again commitments to certain S D. G s And,

Speaker 1:
uh, as asset owner actually also incorporated several S d. G s in their investment policy that are more related to the business they have. So that is something we see with clients that, uh, sometimes it's difficult, you know, to claim that you can contribute to all of the S. D. G. S. So some investors prefer to select certain topics. Let's say 35 S. D. G. S and really try to mobilise finance in those specific goals.

Speaker 0:
So that's interesting now. So we're saying from the 17 S. D. G s.

Speaker 0:
Some are very much clearly pertinent to governments, but there are a select which are a lot more relevant to the invest to the financial institutions being the investment management side. But also, I guess, on the banking side as well A. You must be as a as a large bank with customers globally around the world. You, you you are likely to be contributing to quite a number of the S d DS. Uh, that so which ones do you see on through your work are the most relevant,

Speaker 0:
you know, from a broader i n g perspective. I think where we best contribute towards the S e g s is through the financing that I n g provides. Um, And as you say, we probably do touch upon quite a few of the S D. G s. But to just pick out a few I think are really important.

Speaker 0:
Um, goal eight. Decent work. Economic growth. You know, banks core business is to provide financial services that help businesses grow and prosper. You also got goal, uh, 13 in terms of climate action. Now, I n g have signed up to net zero banking alliance. We've committed to net zero by 2050 but also aligning our portfolios with with a 1.5 degree trajectory.

Speaker 0:
Now, what does that mean, kind of in terms of tangible examples. Well, last year we set a few commitments. Um, we're already quite a large, uh, financier in the renewable space, But we committed to increase that financing from last year's levels by 50% to 2025. But on the flip side, we were also one of the first banks to commit to doing no new financing for dedicated kind of oil and gas fields.

Speaker 0:
um, So, uh, another one, which I think is very important for me is goal nine as well, which is industry innovation, infrastructure. It's one which is very close to my heart. Um, and, you know, I n g are a very big finan across infrastructure sectors. Whether we're talking about transportation, energy or telecoms, to name a few, uh, and while I I mentioned, you know, infrastructure is key and core to a well functioning economy and society.

Speaker 0:
It also will underpin and lay the foundations for our transition and and and kind of road map towards net zero.

Speaker 0:
No, fantastic. Thanks. And clearly Irish infrastructure to you die. You can see you're committed to that. But it's a It's a great point you make there that it is sits at the core of of of the economy. And then Irene, I guess on the for ego you operate, of course, across the different asset classes.

Speaker 0:
Is there anywhere where you see the S. D. G. S a particular particularly relevant across these different asset classes and approach to that.

Speaker 1:
Well, obviously, as we already mentioned that the targets were set for governments. So, uh, there is well, direct link with the government bond investment. So I'm managing the sustainable sovereign strategy where we have, uh, directly in the objective of the fund is to invest in countries that are contributing the most and progressing the most on the S D. G s.

Speaker 1:
And, uh, of course, the advantage of using for this as a class that, uh, all the commitments can be linked directly to the, you know, indicators that you monitor for governments and you cover all the 17 s d. G. S, which is not possible with, you know, let's say a company investments, because then you are limited to just few of S D. G. S. Uh, well, so what you do normally for,

Speaker 1:
uh And if you have, let's say, a sustainable fund, um, in equity or corporate space, usually you see this, let's say, mapping of the economic activity or company to the certain S. D. G. So there is, of course, extra layer of assessment and subjectivity in in this piece. Um, but if you have, you know, data and you can monitor and report on the impact you make, it can be still credible.

Speaker 1:
Uh, so where it's more difficult to do is in the let's say, more private asset classes where you don't have enough data. And then, of course, if you can't really report or monitor specific indicators linked to S D. G s, then uh, yeah, it is a tricky to to make a statement that those investments actually contribute to S D. G s.

Speaker 0:
Yeah, I got you. So that's been great to hear about what you're doing and where it's working. But

Speaker 0:
we we're we're more hard talk style. So tell me now more where it's not working. We all know about the risk of green washing. We're seeing that in the mainstream sustainability space. What about S d G washing? Is that happening? Um, I may say,

Speaker 1:
Well, unfortunately, it does. And and actually, our responsible investment team identified some companies that were making claims that they contribute to certain S d g

Speaker 1:
uh, which were not really credible. Or let's say, if you include second round effects of you know their work, then they are working, maybe against some of the some of the S. D. G s. And of course, you can think of a very, uh, obvious examples like if you have electric vehicles. You can say that you contribute to S D g 13.

Speaker 1:
Uh, but if you include, you know, all the supply chain, and you might actually see that there are spillovers that are not positive for other S D G s. So, um, we think that, um

Speaker 1:
the the way to tackle it is actually to increase awareness in the investment community and actually in the broader community about those targets. Because if more people actually aware what single s d g mean, you know, like, what kind of targets, actually, you need to achieve you can more easily to actually flag those companies or investment products that actually make statements that are not credible.

Speaker 0:
So I you make a very interesting point there.

Speaker 0:
It's clear you can map across to certain S D. G s and you can have intentionality in your business. Um, that these are the S D. G s that we are targeting and we report about around that. But the supply chain might have adverse or unintended negative consequences against other S D. G s. How do you reconcile the two and what are you expecting to see as investors?

Speaker 1:
Yeah. So again, coming back to where you know you can use S D. G s where you can't. So for some asset classes where you have enough data you can monitor, you know the impact across different S D. G s. But for some asset classes, it's just very tricky. So I think what is helpful for investment community is that we do see regulations that actually, uh, well, address certain,

Speaker 1:
uh, certain critical points. For example, there are concepts like do no significant harm or principles of adverse impact. So actually, investors now need to be much more conscious that their investments need to be assessed on the broader scale. And again, S. D. G. S as a concept are still very useful because you see this whole range of topics that are important and that yeah, in the end, everything is interconnected,

Speaker 0:
no, great and and And ash from your side at I N g. What are you seeing in the around? The risk of green washing and S d g washing

Speaker 0:
when it comes to the S D G. SI can see. Um, the room, if you like for green washing, they're relatively broad. You've got long dated 2030 targets. And I think absent annual of those targets, what you'd like to see is kind of a back ending, um, or putting off effort to achieve them.

Speaker 0:
So I think certainly one mitigation would be setting annualised targets, which would drive more transparency, accountability, and hopefully drive progress. Uh, and something that strikes me that, um, Antonio Gutierrez, the UN secretary general, said a few weeks ago is we run the risk that, um, the S T G s will become a mirage of what could have been and that says two things to me. Firstly, we're not doing enough and, you know, genuine actual impact has to come. And it has to come quickly.

Speaker 0:
Yeah, you you you raise a very critical point here, particularly post covid. There's many reports that are coming out saying we've set back the the the progress we were making towards the S D. G. So just on that front, I mean, do you personally still feel ambitious that we will meet the 2030 targets?

Speaker 0:
Well, I think there's a lot to do, and I think, as you say, covid has put it back and we see particularly around inequality. I've seen a lot of reports recently that that you know more of the wealth sits in fewer hands. Um, and then when you look across all of the other, uh, metrics as well, I think what I saw was a lot of companies, especially in the private sector, um, were just in firefight mode during Covid

Speaker 0:
and they had to use their cash flow to shore up their businesses. So the question, especially around things like carbon emissions and climate change, is do those investments? Are they mandatory or discretionary? But I think as we get closer and closer to certain targets that we've set, such as, let's say, 2030 or net zero by 2050 I think it will you re sharpen people's attention to how we're going to get there.

Speaker 0:
But in the conversations that I'm having all the time, it's about what are your long term targets? Can we set annualised targets to get there? But more importantly, what are the actions you're going to take? So I think we need to move away from hollow targets more towards tangible action points just

Speaker 1:
to follow up. Also on, let's say risk that we are not achieving the S D G goals by 2030. I see a lot of, um,

Speaker 1:
you know, pressure on governments these days that their focus is really shifting to more short term solutions because they have problems like inflation and energy, security and geopolitics. And I think for governments, those long term targets are also, you know, now something. Let's say not on the highest points of their agenda. And I think this is really a risk that

Speaker 1:
the long term targets becoming even more longer term. So from the investment community again, I think we need to increase the pressure so that governments stay accountable for the promises they

Speaker 0:
made. So we know the S. D. G s abroad. They have 17 goals, but specifically around social issues and that component ash. I'd welcome your thoughts and reflections more on that side of the S D. G s.

Speaker 0:
Well, I'd say certainly having 70 17 s d. G. S. Uh, we're talking more about just carbon emissions and net zero. We're talking about a whole host of environmental, social and economic factors.

Speaker 0:
And you know, while the S. D. G s are a useful tool, we frequently engage with clients on the topic of, you know, E s G environmental, social and corporate governance. And in those discussions around the, uh, E S G, uh, metrics and strategies of our clients, the S the social pillar is already well integrated in those discussions and from a sustainable financing perspective, we do integrate social k p I s into the loans we provide

Speaker 0:
side. Some examples of that are gender diversity, um, things around health and safety employee well-being. But also it touched upon earlier there. There's a lot of more thinking going into supply chains. And when you look through those supply chains, it doesn't take very long to to stumble upon social issues whether it be, uh, you know, living wages or working conditions. So we're also seeing metrics around supply chains also coming to the lending side as well.

Speaker 0:
So so a Are you actually saying as I n g that you will lend, you will refuse to lend if they don't have a gender balance there? Or is it more of a kind of encouraging K p I target that you then, uh, measure during the term of the loan. Is that how yeah, we very much view sustainable finance and ST to link products as an engagement tool. And what we're not trying to do is enforce something on a company that is already not core to their strategy because they won't have the right incentives to drive towards that positive,

Speaker 0:
uh, improvements. So what we're really doing is we're looking holistically at our company sustainability strategies. And we're looking What do you have metrics around which are quantified? Firstly, do you have targets that you haven't surpassed that we deem to be challenging and ambitious? And if you have both of those things, let's try and integrate them into the loan. And how How are your clients reacting to that? Do you find that they have these targets or is this all new to them? Well, certainly it depends which clients which, um, sectors, because in different sectors we see different,

Speaker 0:
um, challenges. You know, in some sectors, certainly, gender diversity is a bigger concern than others. Um, but ultimately, it comes down to Is it important to the company? Got no great. And is there any point? Uh, so I just to pick up on one last thing on that? Is there any point at which I n g would say,

Speaker 0:
you know, we've been engaging with you positively, and you've taken this on board. But any point during your financing term that you might say, actually, we're we're gonna pull back. You know, I'd say that once we we finance a company, we are committed to the company and we have a very inclusive approach, you know, just saying no.

Speaker 0:
Al almost has less of an impact because when we are lending, we've got skin in the game and we can have those direct conversations with senior figures on the the borrower side to try and drive that positive change. Of course, there are certain sectors and industries which we have exclusion policies around.

Speaker 0:
But I think we very much have an inclusive approach. And I think companies, I'm increasingly telling them, It's important for you to convey to us i n g what are your sustainability goals and targets? Because ultimately that's becoming more integrated into our lending and financing decisions. So when it comes to capital rationing, decided where we put our money. If you've been unable to clearly explain that narrative to us on how you're improving against certain sustainability, factors we may have to assess at some point down the line.

Speaker 0:
You know, where we're lending and and to what extent you know, that's that's that's That's great. That's really a robust, uh uh, and fantastic approach that you that you that you have in place there. I n g and Irene, Uh, from the perspective. How are you approaching this?

Speaker 1:
Yeah, I think that the beauty of S. D G is again to show how all the issues are actually interconnected because there is a risk that, for example, now, a lot of investors really focused on climate. And of course, climate is very urgent problem we need to solve, but in the way it is more straightforward how you

Speaker 1:
you communicate your commitments, right? So a lot of companies and investors make let's say, net zero, uh, commitments or reducing C 02 by certain amount by 2030. But of course, uh, you can't really solve climate problems if all other problems are not solved. And, you know, um, when we discuss, uh, sustainable development, uh, we always discuss, let's say the,

Speaker 1:
uh, just transition, right? So the concept that actually it's not fair that some parts of the society or some countries may be disadvantaged by the let's say, move to reduce carbon. So, for example, in our

Speaker 1:
sustainable sovereign strategy, when we look at S. D. G s, uh, for different income groups of countries, we actually highlight, um, a little bit different set of S D G s that are more relevant for them. So, for example, for high income countries, of course, they need to deliver a lot on climate related S D G. S because also, they are actually responsible for a lot of climate change we've seen today while on the

Speaker 1:
education or poverty or well being. They already, you know, pretty advanced. So that's not the main challenge for those governments, while at the same time for low income countries, you know, they can't really solve any climate problem before they solve

Speaker 1:
very basic needs of their society. So we need to recognise that if we are trying to solve one puzzle of the S d g problem, we need to work also on other problems, because otherwise it will not bring us to where we want to be.

Speaker 0:
And that's excellent, Irene and and I I think what both of you have shown to us is that it's a it's comprehensive. It's a common language. And as you're saying, Irene, it needs to be prioritised according to region and and geography. So Asset TV has a few 100,000 viewers. They are watching and listening to this. If there was one last word, you would leave to them as to why it's critically important to use the S D. G s. What would you say? I think one last word is is it would be very challenging,

Speaker 0:
but it's been really, um, positive for me to hear that. I think we're two sides of the same coin asset management and banking and that, um, ultimately we're both trying to drive capital flows towards creating positive change. But no one firm can do it on their own. This is a collective effort. So I think certainly the collective effort element is something I would like to leave everyone with. Whether it be, you know, companies, private sector, government or individuals. We're all in it together. Irina, Last word with you?

Speaker 1:
Yeah. I think that by increasing awareness of the importance of sustainable development goals, we can really mobilise finance And that's the effort. We, you know, in the end need Because the more people appreciate this framework, the more important and powerful it it will be eventually. So that's what we want.

Speaker 0:
Well, Irina, once again a thank you to both of you for joining us on this session on our path to cop 28

Speaker 0:
s. D. G. S financing the S D. G s. We hope this is, uh, inspired listeners to really look at the S. D. G s and incorporate them into their investment and their business philosophy. Thank you. Both of you. Thank you very much. Thank you.