What are the United Nations Sustainable Development Goals & What do they mean for ESG Regulation in Banks and Businesses?

In September 2015, 193 Member States of the United Nations adopted a plan for achieving a better future for all, outlining 17 Sustainable Development Goals (SDGs). These goals aim to improve health & education, reduce inequality, and spur economic growth while tackling climate change and working to preserve our oceans & forests and protect our planet over the next 15 years. They apply to all nations and aim to leave no one behind.

The 17 sustainable development goals are:

1. No Poverty
2. Zero Hunger
3. Good Health and Well-being
4. Quality Education
5. Gender Equality
6. Clean Water and Sanitation
7. Affordable and Clean Energy
8. Decent Work and Economic Growth
9. Industry, Innovation and Infrastructure
10. Reduced Inequality
11. Sustainable Cities and Communities
12. Responsible Consumption and Production
13. Climate Action
14. Life Below Water
15. Life on Land
16. Peace and Justice Strong Institutions
17. Partnerships to Achieve the Goal

By outlining these SDGs, the UN has given clear ambitions so that everyone, from policymakers and regulators to banks and investors, can understand the symbiosis between the planet, economic activity and economic development.

In essence, any resolution to the problem means moving from punitive solutions to ones that “nudge” behaviours. This resolution means taking our aspirations and goals to deliverable and measurable actions. In essence, the UN has outlined exactly ‘What’ we need to measure to become globally sustainable and has given us guidelines from which we can map all ESG (Environmental, Social & Governance) activity.

Since introducing the 17 SDGs, numerous new incentives and regulations have been implemented.

The Sustainable Finance Disclosure Regulations (SFDR), for example, require financial product providers to report on sustainability in their portfolios and their exposure to adverse impacts through the provision of financial services. The EU implemented these regulations on 10 March 2021. The SFDR regulations are based on the SDGs, so effectively, banks and investors are asked to report on their progress towards achieving them. Failure to comply could affect a bank’s license to operate.

Other actual or pending regulations have a similar impact on banks and businesses. For example, the EU Taxonomy Regulations have been in place since July 2021 and require qualifying businesses to report activity against climate change, climate mitigation, sustainable use and protection of water and the marine environment, transition to the circular economy, pollution and biodiversity. While Germany’s and the EU’s supply chain laws require mandatory reporting on Human Rights Abuses, this will be before the EU taxonomy’s social chapter has been introduced.

Compliance with these regulations is non-negotiable, so how do financial services organisations and their clients go about it?

Regulations are a good start because they compel the commercial sector to change. For example, new US supply chain regulations in “critical” supply chains exclude trade with companies associated with human rights abuses but target sectors like electric vehicles and batteries and critical minerals, leading to more sustainable solutions. However, this highlights the downside of a regulatory approach. It is asymmetric in its suitability across the world, and it entrenches financial services providers as the footsoldiers in both a global challenge and a global conflict.

Aspirations are a fine thing, but the targets and the steps along the way need to be measurable if banks and businesses have appropriate incentives to make banks and business activity more sustainable. This approach is where campaigners, policymakers and regulators have failed, and the result is inevitable conflict, misinformation and ultimately greenwashing.

The solution is to resolve conflicts through agreed and standardised metrics; matching products to SDGs bridges the transition to sustainable trade. The fundamental answer is to make the SDGs and regulations measurable. The only objective way of doing this to avoid self-reporting is to automatically match products or services themselves against the SDGs and regulations.

Coriolis Technologies is working with international banks and trade organisations to build a system that automates non-biased ESG scores, based on the UN’s SDGs. This solution is scheduled for release into the market later this year.

The underlying ambition of the UN is clear – It is vital we take action. The Sustainable Development Goals were released six years ago, in 2015. Now, less than eight years remain on the original 2030 deadline. Time is running short for a solution, and it’s now time to take action.