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ESG Focus: SDG Targets To Guide 4IR Investors

ESG Focus | Feb 27 2020

FNArena's dedicated ESG Focus news section zooms in on matters Environmental, Social & Governance (ESG) that are increasingly guiding investors preferences and decisions globally. For more news updates, past and future:

This story follows on from the earlier published "ESG focus: Investing For The 4th Industrial Revolution".

UN SDGs to set the pace for 4IR ESG investing.

By Sarah Mills

The 4IR and the push to a circular economy are bearing down on the manufacturing sectors.

The UN Sustainable Investment Goals (SDGs) will be a critical guide for manufacturing investors as they form the touchstone for ESG investors.

Naturally, Water (SDG6), Climate Change (SDG13) will have a major impact on manufacturers, along with nearly every industry.

But some SDGs relate more specifically to manufacturing and circularity.

These include Responsible Production (SDG12) and Decent Work and Economic Growth (SDG 8) and Industry, Innovation and Infrastructure (SDG9). Affordable and Clean Energy (SDG7), Life Below Water( SDG14) and Life on Land (SDG15) will also offer focused opportunities, particularly for ESG impact investors.

Intersections between SDGs and 4IR

As an example of the way in which 4IR and the circular economy are expected to intersect, SDG 14 Ocean and waterway conservation will increase demand for robots and drones for plastic collection and marine technology aimed at improving ocean health.

SDG 7.0 (Affordable and Clean Energy) aims to ensure access to affordable, reliable, sustainable and modern energy for all. This will create opportunities for manufacturers of electrical equipment, renewable energy, energy efficient devices, cleaner fossil fuel technology, and energy infrastructure.

SDG 6.0 (Ensure availability and sustainable management of water and sanitation for all) will create opportunities for manufacturers of plumbing equipment, filters, wastewater treatment, smart water harvesting, etc.

SDG9 (Industry, Innovation and Infrastructure), target 9.4: “By 2030 upgrade infrastructure and retrofit industries to make them sustainable – increased resource-use efficiency and environmentally sound technologies and industrial processes.” Clearly speaks to 4IR.

SDG 8 and its commitments around ending modern slavery and providing good working conditions will have a major impact on manufacturing, from potential on-shoring of labour, to geopolitics (roughly 80% of global trade passes through supply chains), to labour costs and the pace at which robots are introduced.

Environmental benefits are likely to be slower to come, (SDG target 12.4, for example, has already been missed, and quite a few countries recently made commitments to coal-fired power plants).

SDG 4IR reference targets

We have extracted the main SDG8, SDG9 and SDG12 targets that are likely to most affect manufacturing below.

Some will be more attainable than others, and it is likely that many manufacturers will reach for low-hanging fruit that requires little investment, such as gender balance, in the near term.

For more capital-intensive efforts, it is likely to boil down to a cherry picking exercise among the SDGs, depending on the business. It’s early days yet, and just exhibiting an awareness of circularity issues will probably be viewed in a favourable light.

It is a long list, but reasonably comprehensive, and is designed as reference point for ESG investors in manufacturing.

SDG8: Decent Work and Economic Growth

8.1 Sustain per capita economic growth in accordance with national circumstances.

8.2 Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high-value added and labour-intensive sectors.

8.3 Promote development-oriented policies that support product activities and decent job creation: Proportion of informal employment in non-agriculture by sex. (Obviously the gender card is low-hanging fruit.)

8.4 Improve progressively, through 2030, global resource efficiency in consumption and production and endeavour to decouple economic growth from environmental degradation in accordance with the 10-year framework of programs on sustainable consumption and production.

8.5 By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities and equal pay for work of equal value.

8.6 By 2020 substantially reduce the proportion of youth not in employment, education or training.

8.7 Take immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labour, and end child labour in all its forms by 2025.

8.8 Protect labour rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants and those in precarious employment.

8.A Increase Aid for Trade Support for developing countries, in particular least developed countries, including through the Enhanced Integrated framework for Trade-Related Technical Assistance to Least Developed Countries. 

8.B By 2020, develop and operationalise a global strategy for youth employment and implement the Global Jobs Pact of the International Labour Organisation.

SDG 9: Industry, Innovation and Infrastructure

9.2 Promote inclusive and sustainable industrialisation and, by 2030, significantly raise industry’s share of employment and gross domestic product, in line with national circumstances and double its share in least developed countries.

9.4 By 2030, upgrade infrastructure and retrofit industries to make them sustainable with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes, with all countries acting in accordance with their respective capabilities.

9.5 Enhance scientific research, upgrade the technological capabilities of industrial sectors in all countries, in particular developing countries, including, by 2030, encouraging innovation and substantially increasing the number of research and development workers per 1 million people and public and private research and development spending.

9.B Support domestic technology development, research and innovation in developing countries, including by ensuring a conducive policy environment for, inter alia, industrial diversification and value-addition to commodities.

9.C Significantly increase access to information and communications technology and strive to provide universal and affordable access to the Internet in least developed countries by 2020.

SDG12: Responsible Production and Decent Work and Economic Growth

12.1 Responsible Production – a 10-year framework of programmes on sustainable consumption and production.

12.2 By 2030, achieve the sustainable management and efficient use of natural resources (Indicators: Material footprint, material footprint per capital and material footprint per GDP.)

12.4 By 2020, achieve the environmentally sound management of chemicals and all wastes throughout their life cycle in accordance with agreed international frameworks, and significantly reduce their release to air, water and soil.

12.5 Reduce waste generation through prevention, reduction, recycling and re-use.

12.6 Encourage companies, especially large and transnational companies to adopt sustainable practices and to integrate sustainability information into their reporting cycle.

12.7 Promote public procurement practices that are sustainable, in accordance with national policies and priorities.

12.C Rationalise inefficient fossil-fuel subsidies that encourage wasteful consumption by removing market distortions, in accordance with national circumstances, including by restructuring taxation and phasing out those harmful subsidies, where they exit, to reflect their environmental impacts, taking fully into account the specific needs and conditions of developing countries and minimising the possible adverse impacts on their development in a manner that protects the poor and the affected communities. 

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