Sustainable Development Funds Not Generating Economic Activity in Countries Most in Need

On average, companies in sustainable development goal (SDG) funds sell only one percent of their products and services in countries “with the greatest need for sustainable development”, research from technology firm Clarity AI has revealed.

The United Nations’ SDGs provide a comprehensive framework for addressing global challenges and promoting sustainable development. Developed for government entities, they are notoriously challenging for investors to align investments to.

Still, many funds aim to invest in companies that contribute to solving the SDGs through their products and services. However, research from Clarity AI has revealed that companies in these funds do not always sell their products in countries where sustainable development is most needed. In fact, on average, companies in SDG funds sell only 1% of their products and services in countries that need them the most. 

To maximize the impact of SDG funds and contribute effectively to global development, Clarity AI says it is crucial for investors and asset managers to gain visibility into the geographical areas where companies are selling their products and services that contribute to the SDGs.

On average, companies in SDG funds receive more than 75% of their revenues from countries in the top quartile of the SDG Index, indicating that funds are flowing to already well-performing nations. What is more, the fund that invests in companies with the highest average revenue from countries in most need sees only 5% of the revenues of its companies coming from these countries. 

To ensure that SDG funds genuinely make a difference where it is needed, investors and asset managers must adopt a more strategic approach.

Merely investing in companies with SDG-related products and services is insufficient. They need to gain visibility into the geographical areas where these companies sell their products and services to ascertain whether their investments align with countries that require progress towards the SDGs the most.

By mapping the revenue distribution of companies in SDG funds, asset managers can make informed decisions to address the gap between investment focus and country needs Clarity AI says.

Understanding which countries are benefiting from SDG-aligned investments and which ones are being overlooked allows for more targeted efforts to redirect resources toward areas that require accelerated progress. By investing strategically and responsibly, SDG funds can generate a greater positive impact and drive transformative change.