Delivery of the SDGs is off track. Investors are crucial in promoting human rights

We are nearly five years from 2030, and the vast majority – 85% – of all Sustainable Development Goal indicators are off track.¹ To achieve them, accelerated collaborative efforts from governments, investors, companies and civil society are needed.

There is currently a gap between investor interest and tangible investor contribution to the SDGs, despite the goals’ strong relevance to institutional investors. This article examines global trends in human rights and social issues across the SDGs and how investors can tackle them.

Investors have a responsibility to respect human rights, as outlined by the United Nations Guiding Principles (UNGPs) on Business and Human Rights. The majority (92%) of the 169 SDG targets are linked to international human rights instruments.²

If current trends continue, 575 million people will still be living in extreme poverty by 2030 and more than 600m people will be facing hunger.³ While the private sector has positively contributed to the SDGs through improving economic growth and decent job creation, it can also contribute to preventing risks such as informal employment and modern slavery, which exacerbate poverty and hunger.

Inequality is a driver of systemic economic risk which can cause lower economic growth and political and economic uncertainty – ultimately leading to lower returns for investors. Workplace demographics remain inequitable, with leadership roles disproportionately filled by men, and workers from underrepresented groups facing discrimination. Investors have a significant role in advancing DEI efforts for all groups in society, including indigenous communities, women and racial and ethnic minority groups. 

“We are calling for a renewed social contract, based on trust, justice and inclusion and anchored in human rights.” António Guterres, United Nations Secretary-General

Achieving the SDGs is doubly important in the Global South

Insufficient financing makes the SDGs particularly crucial in the Global South. Dependency on commodity exports affects the economic performance of these countries and leaves them vulnerable to system shocks. Limited government fiscal policy capacity to support basic public services such as education, healthcare and social protection heightens the risk profile of these economies, in turn discouraging foreign direct investment.

Indeed, the UN Conference on Trade and Development estimates that achieving social protection and decent work in 48 developing economies requires US$5.4 trillion of investment annually.⁴

This lack of financing is further compounded by capital outflows. Recent findings point to capital outflows from the Global South totalling US$2.2 trillion annually,⁵ driven by factors such as unequal exchange, sovereign debt burdens and tax avoidance.

Sovereign debt burdens prevent capital from reaching vulnerable populations, with countries relying on fossil fuel exploitation to repay their debts.⁶ In 2022, 25 developing countries paid more than 20% of their total government revenue in debt service.⁷

Tax avoidance affects all countries, but developing countries have a higher dependency on corporate income to raise revenues, therefore bearing a disproportionately higher cost to corporate tax avoidance. Aggressive tax practices are inconsistent with business commitments to support the SDGs. Investors should therefore ensure companies have responsible tax practices in line with their investees’ (and their own) commitments.

A lack of financing in the Global South remains a major barrier to the SDGs. The PRI has examined how investors can close the funding gap by applying responsible investment approaches to emerging market investments.

Practical steps to advance the SDGs around the world

Investors are crucial in tackling the sustainability outcomes below (human rights, decent work and DEI) to ensure that human rights are respected for everyone. 

Respect human rights

Institutional investors have a three-part responsibility to respect human rights by ensuring they / their investees have:

• A policy commitment;
• Due diligence processes; and
• Access to remedy.

Human rights and the SDGs are intrinsically linked, enabling investors to tackle sustainability outcomes in tandem. Over half (54%) of PRI signatories reported using the SDGs to identify sustainability outcomes connected to investment activities, whereas 33% of signatories use a human rights framework.⁸

Ensure decent work

Investors can ensure decent work by promoting the following safeguards:

• Workers’ voice and social dialogue;
• A living wage;
• Access to benefits, health and safety, and social protection; and
• Equal opportunity and treatment.

These safeguards are interwoven – for instance, a living wage is often collectively bargained. Ensuring decent work also contributes to addressing the SDGs more broadly. By providing a living wage, the private sector could contribute to lifting the 450m people who work in the global supply chain, and their families and communities, out of poverty.⁹

Promote DEI

Investors can promote DEI via their investment decisions, stewardship of investees and dialogue with key policy makers and stakeholders. The ultimate aims are:

• Inclusive corporate cultures;
• Inclusive business models; and
• Inclusive societies.

By promoting DEI, investors can improve financial performance across their portfolio, while contributing to the SDGs by reducing inequality.

Call to action

PRI’s SDG case studies  offer practical examples in terms of investing with SDG outcomes. Investors interested in exploring these issues and contributing to our work can join the PRI’s new Human Rights and Social Issues Reference Group.

 

The PRI blog aims to contribute to the debate around topical responsible investment issues. It is written by PRI staff members and occasionally guest contributors. Blog authors write in their individual capacity – posts do not necessarily represent a PRI view.