Goal 17 of United States Sustainability Development Goals (SDGs) calls for collaboration among governments, the private sector and civil society. “These inclusive partnerships built upon principles and values, a shared vision, and shared goals that place people and the planet at the centre, are needed at the global, regional, national and local level,” the UN said.
Such partnerships or P3s don’t always succeed, wrote the Harvard Business Review. A European Union study of nine projects started between 2000 and 2014 found seven that were over budget or late. But when successful, P3s “provide a trove of valuable lessons for managing any large project that involves multiple organizations—think digital transformations involving multiple consulting and training firms, merger integrations, enterprise software installations, corporate headquarters relocations, and so on,” HBR said. And this is precisely the kind of innovative thinking called for in the SDG goals.
According to a 2017 McKinsey & Company report, “A strategic P3 approach can potentially mitigate the overruns and schedule delays that plague traditional infrastructure project delivery by clearly delineating governance, allocating shared risk, integrating resources, applying best practices, and establishing a life cycle long perspective of costs and accountability.” Assets under management in P3 funds reached $450 billion by the end of 2017, up from just $7 billion in 2000.
The attitude needs to change. “To solve such difficult problems, the answer has to include P3s,” said Gary Survis, a senior fellow at IGEL (Initiative for Global Environmental Leadership). “If left solely in government hands, the potential impact is likely to be too limited by political considerations. It’s private businesses that are forced to compete for their existence that can go in there and truly deliver.”
Survis also pointed at the success of Walmart in reducing greenhouse gas emissions from its operations. As part of Project Gigaton, launched in 2017, Walmart said in 2019 that its suppliers have avoided more than 93 million metric tons of emissions, towards the goal of 1 billion metric tons avoided by 2030. The company aims to meet 50 percent of its electricity needs with renewables by 2025, and is currently at 28 percent.
Investors Are Increasingly Focused On Sustainability
"There’s been a long-held belief that it’s mostly millennials and women who are interested in sustainable investing," said Libby Bernick, head of sustainability at financial services company Morningstar in a conference. But, in fact, “One in every four dollars now is being invested with some aspect of sustainable investment taking place," Bernick explained.
"That’s trending up with no end in sight. What this means in terms of investment strategies is less clear," she said. Many asset managers and owners simply steer clear of companies that don’t conform to their personal views on sustainability—as long as the exclusion doesn’t hurt their portfolio.
For these investors, companies with strong environmental, social and governance (ESG) histories are a plus, but financial gain remains their primary goal. A much smaller group of investors actively seeks out ESG-related opportunities.
Through the third quarter of 2019, just $13 billion has flowed into what Morningstar considers more sustainable-oriented mutual funds and electronically traded funds (ETFs), said Bernick. That’s triple the amount in 2018, but still far from the €595 billion ($662 billion) invested in Europe.
And both fade to insignificance in light of the $5 trillion to $7 trillion the UN says is needed annually to achieve its goals. Still, the amount invested in sustainability is likely to grow as Morningstar and others continue creating more opportunities and tools for so-called impact investors.
"Many of these people understand that there might be business risks related to environmental or social issues in their portfolios,” said Bernick. She offered Volkswagen’s emissions scandal as a prime example.
According to Forbes, such poor ESG performance can erode brand value, company reputation and the other intangible assets that constitute more than 80 percent of company value. Societal and environmental challenges can also threaten supply chains and basic operations.
It’s worth noting in this regard that four of the top five risks identified by the World Economic Forum’s 2018 Global Risks Report were ESG-related, including extreme weather events, water crises, natural disasters, and the failure of climate change mitigation and adaptation.
There are also positive reasons for investors to value companies’ ESG performance. One is the need to cultivate a strong workforce. Like others at the conference, Bernick explained that Morningstar sees sustainability as “very important to retaining and attracting top talent.” Companies themselves can prosper when they view sustainability as a profit centre.
The need to achieve the UN’s sustainability goals is no longer in question. Millions are already at risk. And without effective action to reduce greenhouse gas emissions and achieve carbon neutrality in the coming decades, the planet’s average temperature will surge over the 1.5°C scientists say is manageable. As the United Nations Development Programme said in 2018, "A path exists to 1.5°C, but the window for achieving it is declining rapidly."