Shaping the future by accepting responsibility and investing sustainably

19 January 2018

Our society is facing major challenges from an environmental, social, technological and political perspective. We must all fulfill our social and corporate responsibility, and contribute to a livable future.

Our society is facing major challenges from an environmental, social, technological and political perspective. We must all fulfill our social and corporate responsibility, and contribute to a livable future. To overcome these many and diverse challenges, we not only need a strong political system; we also need businesses to act sustainably and make their own contribution by introducing structural changes and technological innovations. The financial sector has a significant responsibility and plays an important role in the necessary transformation process when allocating capital.

UN SDGs are key

In 2015, the UN adopted Agenda 2030, with the backing of all member states. The core components of this agenda are 17 goals for sustainable development, the so-called SDGs. For the first time, combating poverty and sustainable development have been combined in a single agenda. It aims to achieve an all-round improvement of the future: the future of our planet.

"No one shall be left behind," emphasised the UN Secretary-General Ban Ki-moon when adopting the SDGs.

The holistic dimension of this approach to sustainability shows that new ways of thinking and acting are urgently necessary. Only then can a compromise be reached between sustainability and development. But the true test is yet to come – namely implementation. The UN can only achieve these goals if all actors play their part: states, businesses, local communities and each individual person.

A question of allocation

The inclusion and mobilisation of private wealth is crucially important for reaching the sustainability goals. According to Deutsche Bank, the global wealth of private households amounted to a total of US$250 trillion in 2015. Juxtaposed with this figure, the Brookings Institution expects that $US5 to $US7 trillion will be needed each year to finance the defined sustainability goals. The assets managed worldwide by institutional investors such as pension schemes, investment funds, insurers, etc., are about US$83 trillion according to OECD estimates.

Both investments of private wealth as well as investments by institutional investors tend to have a long-term orientation, as do the sustainability goals themselves. Private investments and investments by institutional investors could accordingly be employed worldwide to end hunger, ensure education, promote health and well-being, secure access to affordable and clean energy, support innovation and infrastructure projects, and fund climate protection measures. Or in the words of Philipp Hildebrand, vice-chairman of BlackRock, the world's largest asset manager, at the Frankfurt European Banking Congress in November 2015: sufficient capital is available – it is merely a question of the right allocation.

The majority of institutional investors are already convinced that sustainable investments help increase risk-adjusted yield. Sustainable investments are also becoming increasingly important for private investors. However, there still seem to be a lot of constraints preventing relevant investment entities and private investors from integrating sustainability factors in their investment decision-making.

In order to further disseminate sustainable investments, we need to raise awareness and acceptance of the fact that environmental and social returns do not mean renouncing economic returns. This erroneous belief is still strongly rooted in the minds of investors, but also of product providers – even though numerous studies have shown that sustainable investments even lead to better financial returns in the long run.

More leadership is imperative

This means that there is not only a need for action, but also for information and education. The financial industry plays an essential role in this regard. Having said that, it is apparent that in order to overcome these obstacles leadership at the top of each and every financial institution is needed, actively driving the change and accepting responsibility – for ourselves and our future, but also for future generations.

Mr Simon Tribelhorn, managing director, Liechtenstein Bankers Association