Yet, a decade on, we are still far from achieving the goals. The gap is particularly acute in emerging markets (EMs), where investment is needed most. Current estimates state EMs need an additional US$3.9 trillion a year to meet the SDGs by the proposed 2030 target.

It's clear more work is needed across the board. And nowhere more so than in the investment community. But what might that look like in practice? And how can we effectively use the SDGs to make meaningful investment decisions?

SDGs – a practical guide for investors 

At abrdn, we apply the SDGs to our emerging market, Asia and impact solutions. We’ve identified eight pillars of impact that distil the SDGs into investable themes. We aim to invest in companies with products and services that demonstrate clear and material alignment with the SDGs.  We focus on local solutions to major global problems such as climate change, unsustainable consumption and production, and social inequality.

How do we determine alignment with the SDGs?

A company must have a minimum of 20% of its capital expenditure (capex), operating costs, or research and development spending linked to the SDGs. We also invest in SDG ‘enablers’ – companies integral to supply chains that enable progress towards the SDGs.

To be eligible for investment, companies must address an unmet need – a gap towards achieving the targets set out in the SDGs. They must then show intentionality towards meeting that need. Finally, the company must measure and report its activities.

Our targets – health and social care

Our alignment process for SDG3 targets two facets of reliable, equitable and effective services: access and innovation. We look for companies that support and enable drug discovery for priority diseases, and those that improve accessibility and affordability of treatment. We also look for companies that contribute to the broader coverage of essential health services in underserved areas. Covid halted progress on universal health coverage, and health workers – already in short supply in many regions – have been stretched to their limits. Scaling up health systems and drug development investment is essential to address the shortfall in healthcare services.

Case study – Clicks Group

Clicks Group is a leading pharmacy operator in South Africa. Through its network of nearly 900 stores and over 700 pharmacies, Clicks contributes to healthy living and improves access to pharmaceutical services across the country. The density and convenience of its network mean that over half the population lives within 5.1 kilometres of a Clicks store.  Over 200 of its stores are in lower-income areas and townships.

The company aligns with SDG 3.8: “achieve universal health coverage, including financial risk protection, access to quality essential healthcare services and access to safe, effective, quality and affordable essential medicines and vaccines for all.”

Unmet need

Access to affordable medicines is an integral aspect of universal health coverage. In addition to the availability of medicines across Sub-Saharan Africa, South Africa suffers from a healthcare personnel shortage that’s acutely felt in pharmacies.  There are only 30 registered pharmacists per 100,000 people – one-third of the Organisation for Economic Co-operation and Development’s average.

Intentionality

Ensuring that essential medicines are sustainably available and affordable is central to Clicks’ business model. As the leading pharmacy operator in South Africa, Clicks aims to expand its footprint by opening 30-35 new pharmacies a year. To address the shortage of pharmacists in South Africa, Clicks offers annual bursaries to pharmacy students and assistance with internships.

Aligning to goals

Clicks allocates a large portion of its capex to expanding its store and pharmacy footprint.  In 2023, Clicks allocated 55% of capex (ZAR 509 million) to new stores and pharmacies.  This added 45 new stores and 38 new pharmacies to its network, which demonstrates its alignment to SDG 3.8.

Final thoughts…

Capital allocation to companies trying to cultivate dynamic, innovative, or affordable solutions to the SDGs has never been more important. Whether protecting our planet and its resources, enabling financial inclusion, or offering affordable essential goods to remote communities – there’s much to do.

For investors, there’s a wealth of companies that offer potential for superior long-term financial returns.  The aim is to pursue profitable growth avenues that benefit from rising demand for products.  These should contribute positively to society and the environment.

Company selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance