In 2020, the GISD Alliance reached consensus on a common definition of Sustainable Development Investing (SDI) that can help establish norms that differentiate investment strategies.
To date, “sustainable investments” encompass a wide range of investment strategies used by portfolio managers, with varying degrees of sustainability and impact. And some financial products and strategies are presented as sustainable without making a meaningful contribution to sustainable development, including to the achievement of the Sustainable Development Goals (SDG) (i.e., so-called green- and SDG-washing).
Ensuring the credibility of sustainable investment products is critical to build trust in the industry and support demand for these products. This definition set minimum thresholds that investment strategies and products should meet to qualify as aligned with sustainable development. This helps counter the risk of SDG-washing and misleading investment products that use sustainable development as a marketing tool. The definition can enable investors to make a significant contribution to the SDGs.
The definition goes beyond broad principles and includes concrete steps for its operationalization in an investment portfolio centered around the SDGs. These steps build on the many initiatives underway to reinforce investment practices (e.g., IFC Operating Principles for Impact Management, and UNDP’s Assurance standards) as well as on existing sustainable-related standards (e.g., Green bond principles, taxonomies of sustainable activities and UN Global Compact Principles). The definition complements and reinforces these initiatives by integrating them into a concrete methodology designed to credibly align investment portfolios with sustainable development objectives.