Precautionary Use of the UN Sustainable Development Goals in Investment Strategies

Adopted in 2015, the United Nations Sustainable Development Goals (SDGs) provide a global framework to end poverty, protect the planet, and promote peace and prosperity. The 17 goals span economic, social, and environmental dimensions and call on governments, businesses, civil society, and the United Nations (UN) system to take collective action worldwide.

Asset managers increasingly reference the SDGs to demonstrate sustainable practices and to align with investor values. However, the framework’s complexity demands careful interpretation. The SDGs include 169 specific targets and 231 measurable indicators designed to track progress toward each goal. Alignment should reflect the intent behind these targets and indicators, rather than a superficial or overly broad interpretation of the goals themselves.

Regulatory Scrutiny

Across financial markets, regulators may be inclined to scrutinize SDG claims more closely. A 2024 study by the European Securities and Markets Authority (ESMA) found no meaningful difference between SDG-aligned and non-SDG funds in terms of their exposure to companies participating in the UN Global Compact or performance on Principal Adverse Impacts (PAIs). These findings raise concerns about greenwashing and how the SDGs may be used in a broader context.

Regulatory scrutiny is already underway. Luxembourg’s financial regulator fined a fund governed by the Sustainable Finance Disclosure Regulation (SFDR) for failing to demonstrate alignment with SDGs it had disclosed as targeted in underlying disclosures. The fund’s monitoring framework was deemed ineffective; an approach to identifying alignment with SDGs that is attentive to the details of the framework and is well substantiated is likely to minimize potential regulatory risk. Regulators expect that what is written in policies and guidelines is reflected in actual practice.

SDG Usage Guidelines

The UN Department of Global Communications has issued SDG Usage Guidelines to govern how the SDG intellectual property is used. Asset managers should review these guidelines, particularly when using SDG branding in commercial or promotional contexts.

Guidance for Asset Managers

Asset managers should treat SDG alignment as a strategic and operational commitment, as referencing the SDGs can imply a measurable and positive impact. Regulators and investors expect claims to be backed by evidence.

Generalized statements should be avoided where possible. When referencing the SDGs within an investment strategy or marketing claims, connect specific data points to the claims or underlying SDG targets and indicators to provide robustness.

Disclosures and claims related to the SDGs should be reviewed to ensure messaging does not imply a level of impact or additionality greater than is intended and can be evidenced.

External Perspective Enhances Strategic Clarity

Navigating the SDG framework and evolving regulatory expectations benefits from an informed and structured approach. Firms that incorporate external perspectives into their sustainability strategies can gain clarity, avoid common missteps, and strengthen the credibility of their disclosures.

External insight and review help align governance, reporting, and marketing with investor expectations and regulatory standards, reducing risk and enhancing transparency.

Book a meeting today to learn how your firm can benchmark or strengthen its SDG strategy, improve reporting, and reduce regulatory risk.