Fund Solutions

Disparity in SDG Funds’ Intentions and Impact in Developing Countries

Research by sustainability tech platform Clarity AI has found a significant gap between the intentions of Sustainable Development Goal (SDG) funds and their actual impact in countries with the greatest need for sustainable development. The study reveals that, on average, companies in SDG funds only sell 1% of their products and services in these countries. The SDG Index, a tool used to assess countries’ progress towards the UN SDGs, underscores that nations are at varying stages of advancement in achieving these targets. It emphasises the urgent requirement for increased efforts and resources in countries with lower scores, which are further behind in SDG attainment. The research findings, based on an analysis of the SDG Index, stress the need for investors and asset managers to align their investments with the areas that demand the most attention. “The goal of SDG funds is to invest in companies that contribute to solving the SDGs, but our research shows a disconnect between investment focus and country needs,” said Lorenzo Saa, Chief Sustainability Officer at Clarity AI. “To maximise the impact of SDG funds and effectively contribute to global development, it is crucial for investors and asset managers to gain visibility into the areas where companies are selling their products and services that contribute to the SDGs.” The study also reveals that the distribution of revenues generated by companies in SDG funds does not correspond to the needs of countries lagging in SDG progress. On average, companies in these funds derive over 75% of their revenues from countries in the top quartile of the SDG Index, indicating a flow of funds to already well-performing nations. Alarmingly, even the fund with the highest average revenue from countries in greatest need has only 5% of its index-included companies’ revenues coming from these countries. 

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