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European institutional investors begin to commit to the UN Sustainable Development Goals

Momentum is gathering pace within European institutional investors as they are increasingly committing money to impact and SDG financing. Europe, led by the headline grabbing Dutch pension plans, has developed a reputation as a breeding ground for ideas and good intention within impact investing over the last decade. Now we are seeing evidence that institutional investors can act on their impact and SDG mandates, investing large allocations to SDG financing.

Collaboration is critical, and allocations will be driven by increased exposure to impact investment opportunities. Moving forward, best practices gained from the European experience can provide perspective and impetus globally as other institutional investors look to integrate SDG and impact related investments into their mandates. Flows across continents will expand the impact investing ecosystem and catalyze further capital towards the SDGs.

As the transition from good intention to real implementation unfolds, European institutional investors are now singing from the same hymn book as they see investments as a tool to fight climate change. This was evident at Impact Summit Europe 2017, where Al Gore led a roundtable discussion with 30 CIOs, CEOs and board members of leading European pension funds and insurance organizations.

Last September, Dutch pension giants APG and PGGM coined the term Sustainable Development Investing (SDIs), emphasizing the transition of SDG investments from niche to mainstream. There is a desire to make SDIs the ‘new normal’. Institutional investors are seriously seeking innovative ways to invest in the fight against climate change, reducing inequality and fight poverty, aligning their fiduciary responsibility with impact, and contributing to a better world.

Dutch Pension funds making the headlines

Arguably, the biggest headlines have been made within the Netherlands. The two largest Dutch pension fiduciaries APG and PGGM are targeting EUR 58 billion and EUR 20 billion respectively in Sustainable Development Investments across asset classes by 2020. Metal Electro Pension Fund, managed by MN announced in March 2017 at the Impact Summit Europe 2017 to link EUR 5 billion i.e. 10% of its assets to the UN SDGs by 2020.

Under the radar searches and commitments drive the momentum

Alongside this, several other investors have gone under the radar across the continent, as they look to finalize commitments. This demonstrates real progress and momentum for European institutional investors. For instance:

  • A Dutch pension and insurance fiduciary manager is currently looking to allocate EUR 50 to 75 million into 5-7 impact funds across geographies, including emerging markets.
  • A European family office is looking to build a EUR 100 million portfolio of diversified listed equity, impact investing funds.
  • A European healthcare foundation is investigating how to commit 1 - 3% of their assets i.e. EUR 5 to 15 million into healthcare impact funds.
  • An insurer is starting a search to invest EUR 30 million into 2 renewable energy private equity funds investing in US / Europe.
  • A large Dutch pension fund is currently searching an investment of EUR 50 million for a private equity/infrastructure fund investing in Europe and aiming to target SDG 7 Affordable and clean energy and SDG 13 Climate action.

Compellingly, a real diversity can be monitored within these commitments, spanning across geographies, asset classes, and the entire spectrum of impact and SDG target. In each of these searches, clear impact measurement will be required by the investors. 

The UN General Assembly and Climate week (12 - 25 September) is an opportunity to deepen the dialogue, expand the impact investing ecosystem, and catalyze further capital to UN SDG financing. Momentum from good intention to real implementation can continue build a head of steam.

Phenix Capital is an impact investing investment consultant based in Amsterdam and London . Our mission is to support the institutional market with educational events, consulting services, and catalyze $800bn of institutional capital towards the SDGs within the next decade.

We are currently building the missing piece of the impact investing infrastructure to facilitate flows of investments and expand the impact investing ecosystem.

APG and PGGM identify potential Sustainable Development Investments (SDI) across 13 UN SDGs

APG and PGGM have worked on investment strategies to boost the UN SDGs and developed taxonomies to provide ‘clear guidance on what type of investments qualify as SDIs (Sustainable Development Investments)’ and ‘kickstart the conversation about a market standard for SDIs’. Learn more about this new development in the impact investing space.

Since their inception in 2015, the United Nations Sustainable Development Goals have attracted attention from investors for their potential to serve as a universal monitoring framework for measuring impact of their investments. Over the past year, there have been many developments bridging the gap between the SDGs and the mainstream investment community in Europe. Last September, Swedish pension funds AP1, AP2, AP3, AP4 and Dutch asset managers APG, PGGM, Actiam, MN and Kempen came together to show commitment to the UN Sustainable Development Goals and put emphasis on using SDGs as a reference framework to guide investors.

The term ‘Sustainable development investments or SDI’ was coined, to represent the link between the United Nations Sustainable Development Goals and tangible investment opportunities.  SDIs are investments that yield market-rate financial returns which generating a positive social and/or environmental impact.

Last December, leading Dutch financial institutions collaborated on the Dutch SDGI agenda to present their perspective on ‘Building Highways to SDG investing’. In their report, the signatories recommend priorities for maximizing ‘SDG investing’ (SDGI) – at home as well as abroad and offer concrete ways to accelerate and scale investments into the SDGs.

We at Phenix Capital welcome this move and hope it will prompt many constructive conversations within the institutional investor community to push the SDG agenda forward.