In this report, UNEP FI Positive Impact Initiative explores new ways to significantly decrease the cost of achieving the SDGs and stimulate business and financing solutions at scale.
1. Are the Sustainable Development Goals (SDGs) beyond reach?
Investment needs for the SDGs are huge, and the scale of current financial flows is as yet insufficient. Private finance is constrained by risk and return requirements, while public finance is in scarce supply. If the resulting financing gap remains unresolved, investment needs will grow over time because of a cumulative effect. Are the SDGs beyond reach? Or could business models be rethought in ways that would increase SDG serving financial flows, but also make them less risky? And could the cost of achieving the SDGs be brought down?
2. The SDG financing gap is symptomatic of a business model gap. Impacts can be used as a starting point for business models and generate revenues. This can reduce costs, address certain risk issues and catalyse private sector solutions.
Impacts have an as yet under-explored potential to generate financial revenues. New, impact-based business models can be developed, where the delivery of positive impacts is a driver of business success. The two core features of an impact-based economy are to work back from impacts to come to the right investment decision, and to achieve as many impacts as possible through each investment. Impact-based business models can also serve to mitigate risk, while their digital components can help reduce costs. Altogether, these models could play a key role in bridging the financing gap for
3. On its impact journey, the financial sector needs to embrace holistic impact analysis.
There is pressure from policy-makers and civil society on business and finance to deliver positive social, environmental and economic impacts. At the same time, positive impacts can generate new financial revenues. The finance sector has a strategic interest in understanding impacts and can play a central role in facilitating the transition to an impactful and impact-based economy. Accordingly, it needs to improve its capacity for impact analysis. The Principles for Positive Impact provide a meta-framework with a holistic definition of impact to complement and promote convergence among the growing body of impact-oriented methodologies and standards.
4. A call to action: towards an impact ecosystem to accelerate positive impact and achieve the SDGs.
No one will achieve the SDGs in isolation. We need an impact- focused ecosystem involving all stakeholders – the private and financial sector, but also the public sector, academia, civil society as well as individuals and their communities. It’s time for the growing impact movement to accelerate; more coordination and collaboration between stakeholders are needed to create an impact ecosystem. Key focus areas should be: consolidating finance sector impact frameworks, organising impact demand and supply, and further developing impact metrics.
In addition to the report, the Positive Impact Initiative released:
PI Model Frameworks: tools through which the PI Principles are interpreted and implemented. They are developed by the PI Initiative to guide the delivery of Positive Impact financial products and for ongoing portfolio monitoring. Financial institutions can use them develop or adapt their own frameworks. Auditors, analysts and other stakeholders can use them to verify or provide opinions on the PI nature of financial products.
PI Impact Radar: to offer a credible and comprehensive set of impact categories that can be integrated with the tools developed to deliver PI finance and contribute to a common frame for the assessment of PI products in the industry. The radar captures the core elements of the SDGs in a way that is applicable to business. It is anchored in international definitions and standards. It is global, neutral and practical.