The Concept of Integrated Corporate SDG Finance

The concept of integrated corporate SDG finance signals a paradigm shift in sustainable finance to realize the full potential of $17trillion in annual corporate-led investments to contribute to the SDGs and to create a multi-trillion-dollar market for corporate SDG finance.

The concept is anchored in a few fundamental ideas addressed in the CFO Principles:

  • Corporate finance strategy beyond specific products
  • Applies to the entire capital structure and all financial products
  • Links to corporate strategy and governance
  • Outcomes-based on and linked to SDGs and global thresholds
  • Includes corporate finance blended with development finance institutions (DFIs)

The goal is to help companies develop a corporate finance strategy for the SDGs that:

  • links to the company’s impact thesis and measurement
  • supports the company’s SDG strategy and investments
  • creates long-term value for the company
  • generates acceptable risk -and impact- adjusted returns for investors

Labs for Financial Innovation

To further develop the concept and provide guidance for companies, the taskforce has been working on three key innovations:

  • Outcome-based products. Corporate-finance products that are linked to a company’s performance on its strategy to contribute to the SDGs
  • Blended corporate finance. Use of development finance to mobilize critical SDG investments toward in less developed countries
  • SDG finance framework. Document highlighting a company’s overall approach to SDG investments and financing, including its SDG impact thesis and strategy and associated SDG investments, and how this approach ties to its capital structure

For each innovation, we are working with Coalitions participants to develop:

  • the rationale and current market and future forecasts
  • potential limitations and areas for improvement
  • guidelines and best practices for issuers
  • recommendations for other actors, such as regulators, banks, investors, credit rating agencies

Market Trends and Definitions

To increase the visibility of corporate SDG investments and source adequate financing, it is important to identify the types of capital expenditures, operating expenses, and other investments that companies are making to support their SDG strategy.

Corporate SDG investments should cover a wide range of industries and support SDG goals and targets on topics including:

  • employee diversity and safety
  • carbon neutrality
  • human rights
  • recycled materials in products
Types of Sustainable Finance instruments
Source: Société Générale

This broad approach is consistent with the concept of multiple capitals. Accounting for integrated investment should include not only investments in physical or financial assets but also in people (human capital), community development (social capital), environmental protection(natural capital), and innovation (intellectual capital).