Yet according to GIIN, an industry research group, 94 percent of impact investments have been made via private equity deals and bond/debt products, with just 6 percent in public equities.
This has greatly limited the amount of assets invested, as most investors lack the assets and connections associated with private deals.
Two key issues have limited this democratization and expansion into public equity impact products. One is that not all SDGs can be easily translated into investable products; for example, how does one identify companies involved with the elimination of poverty?
The second is the requirement that a public equity product should offer diversification and be both liquid and transparent, besides being aligned with the SDGs.
So, until recently, a diversified core public equity solution aligned with the SDGs remained elusive.
New solutions, such as that designed by SSI Indexes, can solve these issues and serve as the basis for ETF products. The methodology, detailed at impactindexsolutions.com, takes a top-down approach to determine which SDGs are investable and screens the full universe of 6,500-plus firms listed on the NYSE and NASDAQ to identify those firms whose products and services target the 20 societal, social and environmental challenges it identified.
The methodology aligns well with the UN SDGs and, by definition, excludes problematic areas such as weapons, tobacco and fossil fuel exploration and production.
Ultimately, the underlying philosophy the UN SDG categories represent focus on finding solutions to global societal and environmental challenges. Combined with existing products offered by a number of firms focused on “green bonds” or impact-targeted debt products, advisors now have a number of effective methods for helping clients “invest with purpose” while targeting UN SDGs.
Scott Sacknoff is the CEO of SerenityShares Investments, an ETF sponsor and Maryland-based registered investment advisor.