Identifying Corporate SDG Investments | CFO Coalition for the SDGs

To increase the visibility of corporate SDG investments and source adequate financing, it’s important to identify the types of investments that companies are making to support their SDG strategy.

Corporate SDG investments should cover a wide range of industries and support sustainable-development targets for a diverse set of topics. These include:

employee diversity or safety
carbon neutrality
human rights
recycled materials in products

Therefore, SDG investments should include not only capital expenditures but also operational expenditures such as research and development (R&D), marketing, human resources costs, and other internal investments to implement sustainable business (for example, supply chain). They should also include external investments like M&A and foreign direct investment (FDI).

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

It’s important for companies to be transparent about what they consider SDG-aligned investment and to demonstrate the causal link between the investment, the strategy, and its impact on the performance of SDG targets.

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Topics in this blueprint

Capital Expenditure

Capital expenditures, or capex, are used to acquire, upgrade, and maintain physical assets—such as property, plants, buildings, technology, or equipment—that are anticipated to provide a long-term benefit to the business (usually 12 months or more).

Operating Expenditure

Operating expenditures (opex) are expenses that companies incur in normal business operations in the near-term (typically within one year or less).

Mergers, Acquisitions, and Divestiture

The pace and scale of the sustainability transition—and the business-model transformation needed in some industries—require corporate investments beyond capex, R&D, and other organic investments.

Foreign Direct Investment

Foreign direct investment (FDI) is a strategic corporate investment in a company based in another country. It gives the investor control or significant influence over the management of the foreign company (typically 10 percent or more of voting stock).

Renewable Energy Purchase Agreements (REPAs)

In recent years, many companies with large energy consumption have pledged to reduce their Scope 2 GHG emissions through the sourcing of renewable energy.

Topics in this section

Capital Expenditure

Capital expenditures, or capex, are used to acquire, upgrade, and maintain physical assets—such as property, plants, buildings, technology, or equipment—that are anticipated to provide a long-term benefit to the business (usually 12 months or more).

Operating Expenditure

Operating expenditures (opex) are expenses that companies incur in normal business operations in the near-term (typically within one year or less).

Mergers, Acquisitions, and Divestiture

The pace and scale of the sustainability transition—and the business-model transformation needed in some industries—require corporate investments beyond capex, R&D, and other organic investments.

Foreign Direct Investment

Foreign direct investment (FDI) is a strategic corporate investment in a company based in another country. It gives the investor control or significant influence over the management of the foreign company (typically 10 percent or more of voting stock).

Renewable Energy Purchase Agreements (REPAs)

In recent years, many companies with large energy consumption have pledged to reduce their Scope 2 GHG emissions through the sourcing of renewable energy.

Topics in this section

Integrated SDG Strategy and Investments

Once companies have developed a compelling impact thesis, as well as measurements for investors and stakeholders (based on their capabilities, assets, and geographical area), the key is to adopt a strategy—and make the right type of investments—to maximize impact.

Identifying Corporate SDG Investments

To increase the visibility of corporate SDG investments and source adequate financing, it’s important to identify the types of investments that companies are making to support their SDG strategy.

Adopting SDG Investment Criteria

Companies can adopt internal investment criteria for corporate investments based on their sustainability strategy. Over time, these criteria can become another “hurdle” rate for investments, alongside the traditional internal rate of return (IRR), focusing on positive SDG impact and management of downside ESG risks.

Governance of SDG Investments

Monitoring of SDG investments should be integrated into a company’s existing corporate-governance mechanisms, including oversight by the board of directors or a specialized committee, risk management and internal controls, external audit, and reporting through the main communication channels for financial and sustainability information.

Topics in this blueprint

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Integrated SDG Strategy and Investments

Once companies have developed a compelling impact thesis, as well as measurements for investors and stakeholders (based on their capabilities, assets, and geographical area), the key is to adopt a strategy—and make the right type of investments—to maximize impact.

Identifying Corporate SDG Investments

To increase the visibility of corporate SDG investments and source adequate financing, it’s important to identify the types of investments that companies are making to support their SDG strategy.

Adopting SDG Investment Criteria

Companies can adopt internal investment criteria for corporate investments based on their sustainability strategy. Over time, these criteria can become another “hurdle” rate for investments, alongside the traditional internal rate of return (IRR), focusing on positive SDG impact and management of downside ESG risks.

Governance of SDG Investments

Monitoring of SDG investments should be integrated into a company’s existing corporate-governance mechanisms, including oversight by the board of directors or a specialized committee, risk management and internal controls, external audit, and reporting through the main communication channels for financial and sustainability information.

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