Lida Preyma, Co-Founder and Managing Partner
This is the last chance decade to realize the Sustainable Development Goals (SDGs) that were adopted by world leaders at the 2015 UN Summit. At the United Nations High Level Political Forum (UN HLPF) on Sustainable Development last month however, it was abundantly clear that the private sector is missing from the table. If we have any hope of achieving the SDGs, all stakeholders must work in collaboration and business needs a front seat at the international fora where pathways forward are being created.
Globally, there are trillions of dollars that can be invested by the private sector into either their own initiatives as they transition into more sustainable products and practices or provided to micro, small and medium sized enterprises (MSMEs). The latter of which are the leading source of economic growth and jobs worldwide. They also tend to provide innovative solutions to complex problems because they are nimble, hyper focused and with the technical advancement that was thrust upon them during COVID, their ability to reach consumers all over the world has exploded. What they are lacking is funding.
While an important part of the solution, financial institutions are not the only source of financing for these companies. We need to get more creative about the sources of capital and the forms in which they come. In addition to government grants, there are myriad investment groups that focus on sustainable finance projects. Most asset managers have investment arms that include private equity and alternative investments. There are small boutique investment banks, venture capital funds, private equity firms, as well as corporate investment divisions, to name just a few. The hurdle to overcome is the investment timeline. Patient capital is required for sustainable investments which have longer-term time horizons.
The regulatory landscape is likewise not conducive to global private sector collaboration or innovative advancement. When there are over 30 taxonomies from countries and regions around the world, with different regulatory frameworks, how can a business decipher, much less choose, which to apply to their multi-jurisdictional enterprise? While national circumstances are important, governments need to come together to work in concert to provide uniform regulatory policy to incentivize business formation, growth and where needed, transition to climate friendly processes, products and even new industries.
As heard in a side event to the UN HLPF, the SDGs were not written for the private sector. Yet the expectation that private markets will drive their success is high. But without closer collaboration between governments, the private sector and civil society, the result will be, well…as expected.