Four principles to integrate Sustainable Development in Corporate Investments and Finance
SDG impact thesis and measurement
Integrated SDG strategy and investments
Integrated corporate SDG finance
Integrated SDG communications and reporting
The CFO Principles supplement the UN Global Compact’s Ten Principles to support companies in the transition to sustainable development and to leverage corporate finance and investments toward the realization of the Sustainable Development Goals (SDGs).
Business should develop a specific SDG impact thesis, which maximizes their unique capabilities and assets, promotes the most effective private-sector solutions to sustainable development and is updated or expanded over time;
Identify and mitigate significant negative impacts on relevant SDGs, based on an analysis of the corporate portfolio and the supply chain and benchmarked against impacts generally associated with comparable assets, activities, or operating contexts;
Align impact theses with countries’ own needs and priorities for SDG investments (climate and SDG gap analyses and investment plans), and where relevant, focus on priority sectors in less developed markets, considering the unique characteristics of each market, and respecting a common but differentiated approach to the sustainability transition; and
Set goals, targets, and indicators that promote and credibly measure the company’s contribution to relevant SDGs and its mitigation of significant negative impacts, using consistent and comparable metrics that are based on the official SDG targets and indicators.
Business should translate their SDG impact thesis into strategic objectives and initiatives that build upon the existing corporate strategy and business model;
Determine specific internal resources, investments (R&D, capex, M&A, FDI) and funding needs to implement the SDG impact thesis and integrated strategy and analyze the financial risk-return profile (IRR) of SDG investments;
Adopt investment criteria and decision-making processes based on SDG impact, alongside financial risk and return investment criteria; and
Leverage and strengthen corporate governance mechanisms to incentivize and monitor the implementation of the integrated SDG strategy and investments (board oversight, internal controls and audit, executive remuneration, and disclosure).
Business should develop a comprehensive corporate SDG finance approach to support their contribution to the SDGs, and raise SDG-linked finance commensurate with the nature of SDG investments and the degree of their strategic integration;
Leverage a full range of financial instruments for SDG-linked finance, including debt (loans and bonds) and equity, whether privately placed or publicly traded, and ranging from short- to long-term maturities;
Structure financial instruments based on the nature of SDG-aligned investments and the degree of their strategic integration, starting with specific-purpose instruments for isolated assets and activities with generally accepted impact theses (e.g., EU Taxonomy), and evolving towards general-purpose and performance-based instruments for more integrated SDG strategies and investments;
Maximize the credibility of SDG-linked financial products through a combination of contractual mechanisms (use of proceeds, covenants, pricing) and corporate governance oversight (board of directors, internal controls, accounting, audit and verification, and reporting); and
Leverage blended finance from governments, development finance institutions, philanthropic foundations and impact investors to de-risk or subsidize corporate investments for technologies, sectors and geographies that are critical for the SDGs but currently underfunded.
Business should engage in proactive investor communications about their SDG impact thesis, strategy, and investments, including through investor calls and engagement, annual financial disclosures, and integrated financial and sustainability reports;
Enhance integrated reporting practices with key elements of SDG-aligned investments and finance, including impact measurement and valuation, alignment of investments with strategy, and accounting and monitoring performance;
Work with rating agencies, external auditors, and second-party opinion providers to ensure the relevance and accuracy of publicly disclosed information and data related to SDG impact, SDG-aligned investments, and SDG-linked finance; and
Work with peer companies and standard setters to harmonize practices and maximize the utility of integrated reporting, by promoting simplification, readability and a balance between innovation and comparability.