The pandemic has put achieving the Royal Cambodian Governments ambitious 2030 Sustainable Development Goals (SDGs) in doubt, but the UNDP is hoping its recently released SDG Impact Standards will help steer the world’s business and investment community toward a more sustainable path.
UNDP Cambodia Resident Representative Alissar Chaker joined UNDP SDG Impact Director Fabienne Michaux to host a webinar officially launching the broad set of standards for Cambodia. Chaker said it’s not only ethical to adhere to these standards, it makes business sense.
To read more about Alissar Chaker click here.
“Asia has sturdy, capable businesses with value chains involving millions of enterprises. Many Asian governments are willing and able to shape market activity to invest in a way that achieves broad nation-building goals. For these reasons, more than 40 percent of the $12 trillion in business opportunities associated with the global [UN SDG] goals around the world are here, in Asia,” she said.
The SDG Impact Standards provide sustainable guidelines and best practices for four categories: private equity funds, enterprises, bond issuers, and the financing of sustainable development.
According to the UNDP, the goal is to, “Guide businesses and investors to integrate sustainability and the SDGs into the core of management systems and decision-making and direct capital to where it can make the most difference to people and planet.”
Private sector pivotal to recovery
The private and financial sectors will play a key role in helping Cambodia – and the globe – shift course and make more headway towards the ambitious SDGs, which include ending world hunger and poverty, achieving full gender equality, and providing a sustainable water supply to the global population.
The UN has identified a financing gap of $3.7 trillion per year standing in the way of these goals.
Chaker said: “The role of the financial sector is critical in catalyzing these changes namely by making impact investment the norm (and not the ideal) and by providing capital for innovation and for achieving the SDGs.”
Cambodia’s private sector employs about 88 percent of the country’s total labor force, according to the 2019 Cambodia Socio-Economic Survey.
To read more about UNDP’s review of Cambodia’s 2021 economy click here.
“In addition to creating employment opportunities and driving economic growth, the private sector is the main source of fiscal revenue. This revenue allows the government to address various development challenges including the provision of essential public goods and services,“ Chaker added.
“Most importantly, we see increasingly the role of the private sector in promoting transformational changes and in supporting the acceleration of the Cambodia SDGs achievement.”
According to the UNDP Development Finance Assessment updated in 2021, the shares of foreign domestic investment and domestic private investment are predicted to increase from 11.4 and eight percent in 2020 to 13.7 and 10 percent in 2025, respectively.
Prioritizing SDG goals
Putting SDGs on the backburner has had disastrous effects that have been felt across sectors and in all aspects of society, and Chaker used the pandemic as a prime example.
“Science demonstrated the links between the pandemic and the current industrial and socio-political systems causing the degradation of nature and social inequalities,” she said.
“The reasons are believed to be related to changes in land use and agricultural practices, legal and illegal wildlife trade, deforestation, poverty, poor sanitation, and lack of education and awareness that helped to create the optimal conditions for the virus to thrive and become so harmful.”
She continued: “A green and inclusive recovery is, therefore, the sure path to a more resilient future, without ignoring the informal sector and micro and small businesses and other people that risk to be left behind.”
Highlighting the importance of reversing climate change, Michaux said physical damage caused by climate change is estimated to cost between 10 to 20 percent of global GDPs by the end of the century, or between $8 trillion and $17 trillion per year.
She said climate action change failure and Covid-19 are the two most pressing long-term risks to the future of the world’s economy, per the World Economic Forum.
“I think that’s pretty amazing that the World Economic Forum counts what ostensibly started as a health crisis and an environmental crisis as the two most likely things that are going to impact negatively on the world economy,” she said.
To read more about the recent AMRO economic outlook for Cambodia and region click here.
Michaux said business as usual is not working, and that the SDG Impact Standards focus on changing the ways businesses manage their day-to-day operations. Instead of an add-on, sustainability needs to be a filter used to inform every single business decision made by an organization, she said.
She added that Covid-19 compounded the climate change issue and set the achievement of the SDG goals back by at least a decade. The annual financing gap in achieving the goals was estimated by the OECD to increase from $2.5 trillion before the pandemic to $3.7 trillion after the pandemic.
The ongoing Russia-Ukraine conflict has caused food and energy security issues throughout the globe, as well as a pressing humanitarian crisis. Michaux pointed to Sri Lanka’s recent default on its $51 billion in foreign debt as an example of how geopolitical, social, and health issues are creating a “perfect storm” with serious negative global impacts.
There are examples of the SDG Impact Standard being used in Asia. The National Development Bond in China issued an SDG bond using the SDG Impact Standards for Bond Issuers to prove that investing in SDGs can create social and environmental impact while also netting valuable economic returns.
Creating a more sustainable future
Last September, Indonesia issued its first SDG bond using the same impact standards. The bonds, worth 400 million euros was issued to the global market and prioritizes social protection, education, and healthcare.
In Malaysia, a group of five businesses have implemented training workshops for the SDG Impact Standards for Enterprises, and hope to receive certification from the UN.
Chaker said Cambodia’s SDG Investor Map is being developed and will highlight investment opportunities that promote sustainable development and contribute to the achievement of Cambodia’s SDGs.
She said Cambodia has a chance to get ahead of the curve by embracing sustainable business models such as de-carbonization. Soon, Chaker said, European customers will simply not purchase products not originating from a green value chain, making it an urgent priority for businesses to get onboard.
While the private sector in Cambodia has not traditional had sustainability considerations in mind as a driver of development in Cambodia, Chaker said the younger generation views things in a different light.
“There are lots of young entrepreneurs who have seen the importance of sustainability either for ethical reasons and they want to do it, or for pure business reasons,” she said.
Chaker and Michaux agreed the world will have to shift toward sustainability if they wish to survive, or suffer more severe consequences in the future.
“Because of all of the megatrends we’re facing, there’s an enormous opportunity cost of not identifying the opportunities and for new business models to lean into those challenges and trends,” Michaux said.