The Sustainable Development Goals (SDGs), which came into effect in January 2016, are a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity.
In terms of costs for SDG implementation, the UN has estimated that the required investment to achieve these goals, in developing countries for example, is approximately US$4.5 trillion per year, with an additional requirement of US$3.1 trillion.
The requirement of this major investment implies going beyond the traditional development assistance (such as the Official Development Assistance) approach towards mobilising investments that are based on finding new and innovative sources of financing.
In this quest, the UN has put out a strong call to action for the private sector to mobilise a substantial share of the required financing. Within this context, Impact Investment has become increasingly relevant as a means to fund development and therefore as a mean to achieve the SDGs. Impact investment can de defined as an investments which generates positive social and/or environmental impact alongside a financial return.
Today, impact investments are worth billions. As a result, they are becoming widely recognized by the international community as an effective means of achieving the likes of the SDGs. However, how does an impact investor know which business or organizations will generate a beneficial social or environmental impacts and financial return? And how does an organization like a Microfinance Institution o Social Business demonstrate its social, environmental and financial performance to attract impact investors?
To help investors identify companies that have superior business models they can use the Social Performance and Impact Rating or ESG assessments. At the same time the MFIs can use these tools to show their competitive advantage.
Inclusion [Social Ratings], through its Social Performance and Impact Ratings and ESG Assessments, can provide insightful information to Impact Investors to identify those organizations that excel in their social and/or environmental objectives. These tools can be used at the same time by Microfinance Institutions or Social Business to communicate its comparative advantage and attract interest from investors, donors and clients and increase the opportunities to borrow capital.
Ana de Miguel
Director – Europe
Inclusion [Social Ratings]