Positive Impact business and finance is defined as that which serves to deliver a positive impact on one or more of the three pillars of sustainable development (economic, environmental and social), once any potential negative impacts to any of the pillars have been duly identified and mitigated.
As the global population approaches nine billion people, today’s world is one of increasing needs, decreasing natural resources, and rapid technological change.
In September 2015, the UN General Assembly formally established 17 Sustainable Development Goals (SDGs) to be addressed by 2030, which effectively provide a common framework for public and private stakeholders to set their agendas and define their policies and strategies over the next 15 years.
$5-7 trillion a year until 2030 are needed to realise the SDGs worldwide, including investments into infrastructure, clean energy, water and sanitation and agriculture. The greater part of the necessary financing and investment will need to stem from private finance.
While a wide range of sustainable finance products and services are available in the market, these mobilise limited funds compared to what is needed and for a limited number of things – based on a pre-identification of acceptable sectors and activities. Hindered by often unattractive risk and return profiles, to-date the amount of private finance mobilised to achieve the SDGs remains in marked contrast to the scale of the needs.
A common vision: the Positive Impact Manifesto
In the Positive Impact Manifesto (released in October 2015 and updated in October 2016), a group of banks and investors outlined that, for the SDGs to be met, they must attract the trillions of USD of mainstream finance. In short, the unmet needs must become the source of a profitable market.
For the private sector to provide a meaningful contribution to sustainable development, it needs to develop and embed a much more comprehensive understanding of sustainability issues, factoring in not only potential negative impacts but also identifying positive impacts.
New business models should be developed to deliver the impacts sought by the SDGs, based on a holistic understanding of the environmental, social and economic needs around us. Such a holistic, impact-based approach is however not currently at the heart of the market, and is precisely the paradigm shift that is required.
Today, financial institutions’ understanding of sustainability issues is mainly centered on risk management: avoiding the risks that environmental and social considerations can produce on their business and seeking to avoid, mitigate and compensate any negative impacts that their business can have on the environment and on society. For this they have developed tools that are directly embedded in their regular analytical frameworks and decision-making processes.
However the question is not just to do no harm, it is to rewire the economy so that it brings prosperity to all and keeps the planet healthy.
A fit for purpose framework: The Principles for Positive Impact Finance
As pointed out in the Manifesto, beyond a common vision, a common framework for the financing of the SDGs should be established to help the finance community to identify and assess positive impact activities, entities and projects. That is the purpose of The Principles for Positive Impact Finance, which also help a broader set of public and private stakeholders define and assess those financial instruments that serve such positive impact business.
The Principles for Positive Impact Finance will be launched on January 30th, 2017 in Paris. The event will be followed by a working session on implementation support. For more information and to register.
Three main clusters of activities have been identified:
- Analytical frameworks for Financial Institutions (industry and/or instrument specific)
- KPIs (on processes and impacts)
- Assessment approaches (variety, scale and degree of additionally of impacts achieved)
A hub for solution-building: the Positive Impact Initiative
Sharing a common vision and a common language, businesses, financial institutions and their counterparts in the public sector and broader civil society should start to form a positive impact community – the Positive Impact Initiative. The Initiative should act as a hub for stakeholders to proactively and collaboratively work towards the development and implementation of new business models and financing approaches that will help address the SDG funding gap and realize the SDGs themselves.
A grounding paper on the approach is being developed with WBCSD to be released early 2017, when pilot projects will be studied.
The Positive Impact Roadmap
The ultimate aim of the banks and investors who have endorsed the Manifesto is to move from the current situation where there is only marginal market traction for achieving positive impact, to one where positive impact becomes commercially attractive, and therefore an integral part of the market economy.
The Positive Impact Working Group
The Positive Impact Working Group (PIWG) is made up of those UNEP FI member banks and investors who have individually endorsed the Positive Impact Manifesto. Its role is to define and carry out the activities necessary to the fulfilment of the Positive Impact Roadmap.
The PIWG is steered jointly by the founding members from the Banking and Investment Commission:
- Denis Childs, Head of Environmental and Social Advisory and Positive Impact Finance, Société Générale
- Hervé Guez, Head of SRI Research, Mirova
- Leonie Schreve, Head of Sustainable Lending, ING
- James Vaccaro, Head of Corporate Strategy, Triodos Bank
UNEP FI secretariat: Careen Abb, Elodie Feller and Elisa Vacherand.
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