Profitability and social change: the new capital equation

The 2030 Agenda and the Sustainable Development Goals are celebrating their anniversary. The 17 goals, forged by the United Nations and immediately recognized as universal, celebrate their tenth anniversary this September 25th. With its global roadmap intact, it addresses the planet's major challenges, summarized as the eradication of poverty and hunger, the preservation of health and well-being, the achievement of gender equality, and the promotion of energy neutrality, with the laudable goal of engaging governments, businesses, and civil society in its vision.

The SDGs, then, are coming of age. Although the celebration of such an anniversary leaves a bittersweet taste. After a decade since their founding act, the balance sheet reflects almost as many shadows as lights. Certainly, there has been significant progress in each and every one of their 17 parameters. They are evolving immersed, among other issues, in a climate fight for which the scientific community is calling for greater ambition and more decisive progress, but a funding gap persists in a context of geopolitical fragility.

Without a doubt, a fundamental contribution to this universal cause is purpose-driven investing, which should definitively abandon its idyllic conception—not always true or accurate—as a philanthropic or niche alternative, and become a solid, profitable, and transformative strategic option, capable of attracting private capital to wealth management portfolios. Investing in this financial formula ten years after the launch of the 2030 Agenda, and above all, five years after its ultimate goal, is not only the right thing to do, but the smartest thing to do. Because time is running out.

Purpose-driven investing seeks to participate in companies and initiatives that generate a positive impact on the world, providing stakeholders and shareholders with transparent and reliable information about their degree of productive and strategic co-responsibility with the 2030 Agenda. Their portfolios therefore adopt environmental, social, and corporate governance (ESG) criteria. Or, to put it another way, it is an investment that seeks to combine profitability with environmental, social, and corporate governance criteria. It emerged in the middle of the last century with the creation of the Ansvar Aktiefond in Sweden, with broad moral requirements and codes of good practice. It was established in 1971 with its American version, the Pax World Fund, which expressly excluded companies financially linked to the Vietnam War.

However, its DNA, which seeks out companies with sustainable businesses and social impacts on stock markets, is currently showing signs of altered tension. On the one hand, it enjoys commendable health, generating returns and weathering long-term risks. But on the other, it reveals a rather serious ailment : a deficit of green finance, which provides sustainable loans to the business community to launch their ESG-certified projects. In other words, there are not enough green loans to promote private initiatives that comply with environmental and social standards.

The current financing lines with the SDG seal only cover a sixth of the private sector's needs projected for the end of the road map defined by the United Nations. In other words, the investment required for sustainable industrial reconversion is not being met, despite the underlying benefits of purposeful investments. This is why the entire banking sector—as JP Morgan Chase admits—and the financial and insurance sector—as a collective investment vehicle capable of weathering socioeconomic or geopolitical uncertainties—must correct this anomaly.

To do so, we must change the status quo of immobility that has once again infected our planet, emphasizing that, for example, according to the investment firm Jefferies, portfolios that focus on ESG values ​​offered 13.5% higher returns in 2024 than those designed with other assets, and that this could increase to 21.1% this three-year period. Similarly, it would be useful to break with a strange paradox: the one that asserts, first of all, that ESG values ​​certified a sublime year in 2024 , with assets valued at $29.86 trillion—the US GDP—but which admits, in a second analysis, that the capital allocated by the 377 companies with the largest market capitalization to sustainable and inclusive initiatives barely reached $683 billion between 2019 and 2023.