September 2025 - Responsible Investment Association

The Sustainable Development Goals (SDGs) were adopted in 2015 by UN member states as a shared global framework to address the world’s most pressing challenges. The 17 interconnected goals cover a broad range of issues, such as poverty eradication (SDG 1), climate action (SDG 7), quality education (SDG 4) and gender equality (SDG 5).[1] These goals aim to promote inclusive economic growth, environmental protection and social equity, forming the foundation of the UN’s 2030 Agenda for Sustainable Development.

While originally developed to guide national governments and policy agendas, the SDGs have increasingly gained traction in the private sector.[2] Businesses and investors are integrating SDG considerations into strategies, disclosures and capital allocation decisions. For investors, the SDGs provide a structured framework to understand global priorities and align long-term financial objectives accordingly.

SDG Investing Is Gaining Momentum

Since 2015, both sovereign and corporate issuers have increasingly turned to SDG-linked bonds to finance sustainability objectives.[3] Governments such as Indonesia, Mexico and Chile have issued SDG bonds tied to national priorities across education, health and climate resilience – with clear use-of-proceeds aligned to specific SDGs. On the corporate side, issuers are adopting SDG-aligned frameworks to raise capital for projects which contribute to goals such as affordable clean energy, and sustainable cities and communities, promoting transparency and enabling investors to assess measurable outcomes.

Issuance of SDG-linked bonds has expanded significantly over the past decade, with corporate issuances growing from a few dozen to over 2,200 in 2024; government issuances followed a similar trajectory, to over 650.[4] This rise in issuance reflects growing investor appetite for sustainability-linked investments.

Why Investors Are Turning to the SDG Framework

The SDGs have become a widely used framework in sustainable investing. According to the 2024 Assessment Report by the UN’s Principles for Responsible Investment, over 50% of reporting asset owners and asset managers use the SDGs to measure sustainability outcomes across their portfolios.[5] This growing adoption reflects the framework’s practicality, transparency and alignment with both voluntary and emerging regulatory standards.

One of the key benefits of the SDG framework is its clarity. While Environmental, Social and Governance (ESG) investing has gained traction in recent years, the landscape of ESG data and disclosure standards remains fragmented. Investors face a range of definitions, methodologies and data sources that can vary by markets and providers. In contrast, the SDGs offer a globally accepted framework built around 17 goals, 169 underlying targets and over 200 indicators to measure progress. The SDGs are also embedded in many major international disclosure and reporting frameworks, such as the Global Reporting Initiative, the EU’s Sustainable Finance Disclosure Regulation and the International Sustainability Standards Board. This standard approach offered by the SDG framework helps reduce ambiguity, improving the quality and comparability of disclosures.

Importantly, the SDGs offer broad coverage, addressing priorities across the full ESG spectrum. For example, SDG 8 (Decent Work and Economic Growth) encourages labour rights protection and safe working environments, while SDG 16 (Peace, Justice and Strong Institutions) emphasizes reducing corruption and bribery. As a result, the SDGs provide a comprehensive lens through which investors can align capital with long-term, real-world impact across sustainability themes, potentially contributing to greater thematic and sector diversification within portfolios.

How investors Can Approach the SDG Investment Opportunity

The SDG framework has demonstrated its effectiveness in driving measurable progress on global priorities, with 17% of assessable targets already achieved or on track – including SDG 9.c (Access to Information and Communication Technologies and the Internet) and SDG 7.b (Investing in Energy Infrastructure).[6] However, broad implementation challenges remain. According to The Sustainable Development Goals Report 2024, 48% of assessable targets still show moderate or severe deviation, and 17% have fallen below the 2015 baseline levels.[7] These reflect the urgent need to realign with the 2030 agenda and underscore the value of the SDG framework as a tool to help identify where financial capital is required.

According to the UN Conference on Trade and Development, achieving the SDGs will require about USD $5-$7 trillion a year until 2030,[8] including investments in infrastructure, clean energy, water and sanitation, and agriculture. Significant funding gaps are estimated to range between USD $2.5 trillion to USD $4 trillion per year.[9] This unmet capital demand creates an opportunity for investors to contribute to global progress while potentially capturing sustainable long-term returns.

The SDG framework can help investors identify opportunity-rich sectors where sustainability themes intersect with long-term financial growth possibilities. Sectors such as healthcare, clean energy, education and infrastructure are directly aligned with the goals. These sectors are expected to experience structural expansion driven by demographic shifts, policy support and technology adoption.

Leveraging the SDGs also gives investors the possibility to spot untapped opportunities in various markets. Tools such as the SDG Investor Map[10] provide country-level insights on commercially viable investment themes, backed by actionable metrics. Several institutional investors have launched blended finance vehicles targeting SDG-aligned opportunities in emerging markets, aiming to mobilize private capital towards underserved regions[11].

Conclusion

The SDG framework provides investors with both a directional compass and an actionable toolkit. By incorporating SDG indicators into investment analysis, sector targeting and regional allocation, investors can potentially move from ESG objectives to measurable outcomes. As disclosure standards evolve and sustainable investment expands, investors who adopt SDG-aligned thinking today may be better positioned to capture long-term growth opportunities, mitigate ESG risks and contribute to global developments.

Sources:

[1] https://sdgs.un.org/goals

[2] https://sdg.iisd.org/commentary/guest-articles/businesses-are-committing-to-the-sdgs-but-what-about-their-impact/

[3] https://unctad.org/publication/financing-sustainable-development-report-2024

[4] Bloomberg Finance L.P.

[5] UN PRI, Global responsible investment trends: inside PRI reporting data https://www.unpri.org/download?ac=23004&adredir=1#page=13

[6] UN, The Sustainable Development Goals Report: https://unstats.un.org/sdgs/report/2024/The-Sustainable-Development-Goals-Report-2024.pdf )

[7] UN, The Sustainable Development Goals Report: https://unstats.un.org/sdgs/report/2024/The-Sustainable-Development-Goals-Report-2024.pdf )

[8] https://unctad.org/publication/financing-sustainable-development-report-2024

[9] https://unctad.org/publication/financing-sustainable-development-report-2024

[10] For more details about SDG Investor Map, please refer to United Nations Development Programme website: https://sdgprivatefinance.undp.org/leveraging-capital/sdg-investor-platform

[11] https://www.convergence.finance/blended-finance

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“The future is already here – it’s just not evenly distributed.” Science fiction writer William Gibson’s prescient comment from the 1990s resonates in today’s increasingly polarized conversation about the energy transition.

While headlines declare setbacks and political headwinds, the data tells a different story: the transition has not reversed, it is just taking a different path to the one we expected. Global energy investment is set to reach a record US$3.3 trillion in 2025, with clean energy technologies attracting US$2.2 trillion, twice the US$1.1 trillion flowing to fossil fuels. But the transition we thought we might have – largely policy-driven, with developed markets leading the way because they could afford to implement change first – has been turned on its head.

Original Roadmap

The original roadmap envisioned Europe and the US hitting net zero by 2050 while emerging markets followed later, with China targeting 2060 and India 2070. This made sense because developed markets had experienced decades of flat or declining energy demand and had almost universally supportive policy.

The developed world’s energy transition was modelled as a transformative one. Where previous transitions had been additive, with new forms of energy layered onto existing forms to meet new demand (biomass supplemented with coal then oil), this one would require the existing energy forms to be replaced. Hence the need for significant policy measures to effect the required change. Emerging markets, on the other hand, were expected to make a gradual additive transition to meet new energy demand, without the supportive policy.

A Different Transition

All this has changed. With surging total energy demand – particularly due to the exploding volume of data processing – and diminished policy momentum in developed markets, they are transitioning more slowly than expected, and in an additive way. The opportunities for decarbonization solution providers remain abundant: more total energy demand means more potential demand for decarbonization technologies. But these technologies are now seen in the developed world as part of an all-of-the-above energy solution.

Meanwhile, emerging markets are surprising dramatically to the upside, driven not by policy but by the simple economics of (mostly Chinese-manufactured) clean technology that has become the cheapest option available. In some sectors in emerging markets, such as electric vehicles in China, we are seeing a transformative energy transition. Most new cars, and now 10% of all cars, as well as the vast majority of two-wheelers sold in China, are electric.

Acceleration

We expect both trends to accelerate. Developed-market energy demand growth has to date been mostly a phenomenon in the US, where data centres are on course to account for almost half the growth in electricity demand between now and 2030. By the start of the next decade, the US is set to use more electricity to process data than to manufacture all energy-intensive goods combined. Alongside artificial intelligence, the increased energy demand additionally reflects industrial reshoring and diminishing returns from decades of efficiency improvements.

There are now also early indications of higher electricity demand in Europe, whose creaking electrical infrastructure will require investment and drive demand for decarbonization solutions. Fossil fuels simply cannot meet the new energy needs efficiently or economically, even with favourable policy. So, the market for decarbonization is still growing, creating opportunities for investors, and the imperative to advocate for policy that encourages it is more pressing than ever.

Second Transformation

The second transformation, the change in the trajectory of the energy transition in emerging markets, is even more significant for global emissions. China’s exports of solar, wind and electric vehicles to the Global South now account for 47% of total exports – nearly matching its developed country exports for the first time. The scale is staggering. Pakistan alone imported 19 GW of solar modules in 2024, equivalent to nearly half its grid-connected capacity. This represents the solution to what has long been the biggest challenge in climate policy: how to transition emerging markets, which constitute the majority of future emissions growth. Chinese solar panels are lighting rural Zimbabwean communities, while affordable Chinese electric vehicles are transforming city streets from Mexico to Thailand. Within China itself, clean energy contributed a record US$1.6 trillion to the economy in 2023, becoming one of the country’s primary economic drivers.

Perhaps because we are not experiencing the energy transition we expected, the valuations of companies that are positively exposed to decarbonization often do not reflect the structural growth supporting them – even though the ones we hold in our decarbonization-focused investment portfolio continue to grow at almost double the rate of the market as a whole. And for investors looking to do good as well as generate a financial return, we also see more opportunity for impact in a world where energy growth is accelerating, and decarbonization is no longer only, or even primarily, a developed world phenomenon.

As futurologist Roy Amara observed, “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” The energy transition may have exemplified Amara’s Law: early hype gave way to disillusionment, but now the long-term transformative effects of the energy transition are becoming undeniable.

Sources:

IEA World Energy Investment 2025, https://www.iea.org/reports/world-energy-investment-2025

IEA Energy and AI Report 2025, https://www.iea.org/reports/energy-and-ai

Centre for Research on Energy and Clean Air analysis, various reports 2024-2025