Capital Markets and their role in Sustainable Development Finance and the Sustainable Development Goals
Capital Markets and their role in
Sustainable Development Finance and the Sustainable Development Goals
11th of September from 115-230pm Conference Room C
Hosted by UNCTAD
Steve Waygood, Chief Responsible Investment Officer, AVIVA Investors
Lenora Suki, Senior Product Strategist, Sustainability Initiatives, Bloomberg LP
Mariela Vargova, Ph.D., is a Senior Sustainability Analyst with the Sustainability and Impact
Investing team at Rockefeller Financial Asset Management.
Chantal Line Carpentier, Ph.D. Chief, New York Office of UNCTAD
Chaired by Felix Dodds Tellus Institute
Background information on side event: This will focus on a response to the SDG OWG and the Intergovernmental Committee of Experts on Sustainable Development Financing
For generations policy makers have sought to align the interests of the financial markets and society.
Nowhere is this tension more keenly and persistently felt than in the relentlessness of the capital markets to allocate capital to short term, unsustainable uses. Policy-makers need to plan for the long-term and tackle a range of environmental and social issues, such as poverty, climate change and human rights. As well as Nexus issues such as Water-Energy-Food.
Adopting the conventional definition of sustainable development and applying it to capital markets:
“capital markets that finance development that meets the need of the present, without compromising the ability of future generations to meet their own needs.”
Public policy makers have traditionally tended to focus on the flow of aid when considering traditional sustainable development issues.
However, private capital in the tens of trillions is allocated matters far more than how the tens of billions of dollars of official assistance get dispensed.
A primary failure of the capital markets in relation to sustainable development as one of misallocation of capital. This, in turn, is a result of global governments’ failure to properly internalize environmental and social costs into companies’ profit and loss statements. As a consequence, the capital markets do not incorporate companies’ full social and environmental costs. Indeed, until these market failures are corrected through government intervention of some kind, it would be irrational for investors to incorporate such costs since they do not affect financial figures and appear on the balance sheet or – therefore – affect companies’ profitability. This means that corporate cost of capital does not reflect the sustainability of the firm. The consequences of this are that many unsustainable companies have a lower cost of capital than they should and so are more likely to be commercially successful than their more sustainable competitors.