Shaping the future by accepting responsibility and investing sustainably
Our society is facing major challenges from an environmental, social, technological and political perspective. We must all fulfill our responsibilities to a sustainable future. To overcome these diverse challenges, we not only need a strong political system, but also businesses which act sustainably and make their own contribution with structural changes and technological innovations. The financial sector has significant responsibilities, and an important role in the necessary transformation process, when allocating capital.
UN SDGs are key
In 2015, the UN adopted Agenda 2030, with the backing of all member states. The core components of this agenda are 17 goals for sustainable development, the SDGs. For the first time, combating poverty and sustainable development have been combined in a single agenda. It aims to achieve an all-round improvement of the future of our planet. “No one shall be left behind,” emphasised the UN Secretary-General Ban Ki-moon. The holistic dimension of this sustainability approach shows that new ways of thinking and acting are urgently necessary – a compromise between sustainability and development. But the true test is yet to come – implementation. The UN can only achieve these goals if all play their part: states, businesses, local communities, each individual.
A question of allocation
The mobilisation of private wealth is crucially important for reaching the sustainability goals. According to Deutsche Bank, the global wealth of private households amounted to a total of USD 250 trillion in 2015. Juxtaposed with this figure, the Brookings Institution expects that USD 5 to 7 trillion will be needed each year to finance the SDGs. The assets managed worldwide by institutional investors such as pension schemes, investment funds, insurers, etc, are about USD 83 trillion according to OECD estimates. Both investments of private wealth and investments by institutional investors tend to have a long-term orientation, as do the sustainability goals themselves. Both could accordingly be employed worldwide to end hunger, ensure education, promote health, secure access to affordable and clean energy, support innovation and infrastructure projects, and fund climate protection. Or in the words of Philipp Hildebrand, vice chairman of BlackRock, the world’s largest asset manager, at the Frankfurt European Banking Congress in November 2015: sufficient capital is available; it is merely a question of the right allocation.
The majority of institutional investors are convinced that sustainable investments increase risk-adjusted yield. Sustainable investments are increasingly important for private investors. However, there are still constraints preventing relevant investment entities and private investors from integrating sustainability factors in their investment decision-making. In order to further disseminate sustainable investments, we need to raise awareness and acceptance of the fact that environmental and social returns do not mean renouncing economic returns. This erroneous belief is still rooted in the minds of investors and product providers – even though numerous studies have shown that sustainable investments even lead to better financial returns in the long run.
More Leadership is imperative
This means that there is a need for action, information and education. The financial industry plays an essential role in this regard. It is apparent that to overcome these obstacles leadership at the top of every financial institution is needed, driving the change and accepting responsibility – for ourselves and for future generations. The ongoing digitalisation opens up new opportunities to tackle all these issues, be it having correct data available, everywhere at anytime, be it new educational tools and working models, but also to reach out to new generation clients via innovative channels.
Taking a look at Liechtenstein
Stability and sustainability are probably the most important challenges of today, and they shape political agendas. The example of Liechtenstein – a financial centre in the heart of Europe with an international orientation – shows that small national economies can make an important contribution to reaching the SDGs, as well as to stability and sustainability in general. Liechtenstein, with its 37,000 inhabitants, offers the institutional framework for sustainable development: economic growth at a high level, low CO2 emissions, fast unbureaucratic channels to allow capable and adaptable behaviour. With these indicators alone, Liechtenstein has an advantage over larger economies in terms of initiating and realising sustainability. With its balanced, debt-free national budget and a AAA country rating Liechtenstein is one of the most stable global countries. The country has proven to be a reliable partner to the international community over the years. This can be seen in its participation in exchange of information, effective measures against money laundering and terrorist financing, and implementation of international regulations. All this demonstrates that Liechtenstein is a small country that acts sustainably. And despite all the regulations and international obligations – which may be challenging – the Liechtenstein financial centre is successful.
Investing with impact
With more than 1,300 non-profit foundations and many years of experience and expertise in wealth management, the Liechtenstein financial centre has the ideal preconditions for accepting a significant role in the responsible investments of assets and thus to serve as an important bridge between investors who want to invest their money in a meaningful way and the existing financing gap for sustainable investment. LGT – Liechtenstein’s largest banking group – is one of the pioneers in this regard, nationally and internationally. With its subsidiary, LGT Venture Philanthropy, and its sustainable investments, it has become one of the most important impact investors. The goal is to help disadvantaged people around the world directly. Numerous examples show that investments needed for that purpose are bearing fruit – such as the opportunity to increase the number of children with access to school in poorer regions by a factor of ten, or contributing to improved electricity supply by supporting the construction of small power plants in Indian villages. These examples illustrate, in the Liechtenstein financial centre, sustainability is not merely a model for the future. It is the model for the future!