Achieving the United Nations’ Sustainable Development Goals Requires Sustained Development

November 17, 2015 – The United Nations recently adopted a new set of goals for improving the lives of people around the world. These goals are collectively called the Sustainable Development Goals (SDG) and they replace the expiring Millennium Development Goals (MDG). Magni Global Asset Management LLC (Magni) applauds the new goals and congratulates everyone involved in achieving progress on MDG. Building on the prior success of MDG and addressing the far reaching goals of SDG has four clear implications.

  1. Every country in the world should be considered developing and no country has an economic and social model which is both the sustainable and socially just. [1]
  2. More than government action will be required as businesses and consumers need to make significant commitments and changes. [2]
  3. The required funding for initiatives targeted at SDG is staggering and estimated to be around $53 trillion.[3]
  4. The richest countries are expected to provide the required funding. [4]

The unprecedented expectations for the breadth of impact, level of commitment, pervasiveness of involvement, and staggering financial investment will require fresh approaches. The world must search for ideas that will simplify the activities to make progress easier and funding requirements more manageable.

Fortunately, there are some widely-accepted economic ideas which, if adopted by the countries of the world, would enable much faster progress on SDG. The economic ideas relate to the conditions for faster and more just economic development. Greater and fairer economic development has three important additional benefits as the world pursues SDG:

  1. The additional wealth created from faster economic progress can be used to fund SDG initiatives.
  2. Economic progress lifts countries to more developed categories (e.g., “least-developed” to emerging, emerging to developed). Countries in more developed categories have greater progress on SDG. [5]
  3. The more developed the country, the higher the population’s awareness of, and the higher their priority for, achieving SDG.

The good news is that countries have been implementing many of these economic ideas, though more could be done and progress could be much faster. The better news is that implementing these economic ideas requires comparatively minimal funding and tends to provide relatively quick benefits to the population.

Sustainable Development Goals are Enabled by Development

Earlier this year, the United Nations under Ban Ki Moon’s leadership published a report regarding the world’s progress in achieving the MDG adopted in 2000. The report is impressive and contains statistics demonstrating the significant progress so far this century. At the same time, the report also identified unresolved problems and the need for additional efforts.

A common and not surprising element in the report is the focus on emerging countries and the “least developed countries” in particular. Implicit in that focus is the much greater severity of the issues facing citizens outside the developed world. In other words, as countries progress from least developed to emerging and then to developed, the unresolved SDG-related issues become less significant. One logical conclusion is that helping countries to move more quickly from least developed to emerging AND from emerging to developed will, in and of itself, help accomplish the SDG.

Sustainability without Development is not Sustainable

In preparation for the adoption of SDG, Addis Ababa hosted a conference of Financing for Development. The agenda arising from the conference identified that achieving SDG would require the astonishing figure of an additional $53 trillion in incremental funding by 2030. Further, the agenda indicated that these funds should come primarily from the governments of the developed world. To put that number in perspective, every year the world would need to find additional money roughly equal to the total annual federal government expenditures of the United States to fund SDG initiatives. Such a huge investment is unprecedented in the history of the world.

The conference attempted to define new sources of revenue to help provide the required funding. The major revenue source identified in the process was the capture of money from international tax evasion. The conference identified roughly one trillion dollars per year as the potential money available from complete elimination of tax evasion. The members were unable to agree on a new United Nations mandate to pursue collection of these monies. However, even if the entire opportunity was collected (which is unlikely) and there was no cost to the collection of the money (the costs may not be large, but there will be costs), this unmandated initiative could only cover less than 30% of the need and more than $38 trillion would still need to be found.

Expecting developed countries to provide significant funding will, in all likelihood, be exceedingly difficult. Despite having better performance against SDG[6] than emerging and least-developed countries, developed countries have their own challenges and these challenges place significant strain on their respective government budgets. Populations in most developed countries are growing much more slowly than in prior decades and, in some cases, have reached the tipping point where their birth rates are below the replacement rate, thus meaning they are likely to start shrinking. The ratio of the number of workers supporting a retired person continues to decrease and the government costs for services to their older citizens are growing very rapidly. The debt of developed countries is significant and may soon reach unsupportable levels in many of these countries. Simply put, developed countries will likely be very busy managing their existing finances and would have an extremely difficult time allocating meaningful amounts of additional money for SDG initiatives.

Fundamentally, there is currently not enough wealth in the world to provide the required funding. In 2014, the Gross World Product per capita (purchasing power parity) was $16,200[7]. If there were no additional development, the world would be faced with an unsolvable dilemma. The existing inequities could be maintained OR a forced redistribution of wealth and producing assets might be done to eliminate some, or most, of the inequities. A forced redistribution of wealth and producing assets would create tremendous social upheaval, if it could be implemented at all. Even if successfully implemented, everyone would be equally poor.

Therefore, it follows that a major part of the world’s effort must be an increase in the overall wealth in the world. Since wealth creation comes from development, the world needs more development.

The additional wealth must be created in a manner that allows everyone to participate, while helping countries move from least-developed to emerging AND from emerging to developed. A key issue in providing progress against SDG is finding a path that accelerates the evolution of countries and creates wealth for the broad population instead of the privileged few. Such a path creates a wealth effect that is more permanent and has concomitant improvements in societal outcomes.

Country-Level Governance Policies for Inclusive Wealth Creation

Despite the many disagreements among economists on most issues, there is a wide degree of agreement on the conditions for economic success in a country and how to make the economic success available to the broad base of the population. Countries are more successful when both the economic infrastructure, as well as, the legal and regulatory systems are open, honest, transparent, and stable. These desirable conditions produce successful countries by creating an environment conducive to effective corporate governance. Companies flourish where there is good corporate governance. Citizens enjoy the benefits of a robust economy and good jobs.

Creating the desirable conditions requires more than words. Policies can be discussed, policy directions can be stated as intentions, and policies can even be enacted, but real progress requires implementation and compliance.

An effective environment for corporate governance is one of transparency, which means among other things that companies can do business without the burden of crony capitalism, corruption, unfair regulation, and government-protected competitors. Governance policies that address the following are good examples:

  • If property rights are enforced, companies and individuals feel secure that their assets are worthy of investment.
  • If a company or a person can unjustly lose their property, there is less incentive to invest in such property to make it better.
  • If the financial systems of the country are open and easily accessed, companies can complete routine transactions and capital investment activities in a fair and effective manner.
  • If markets are well supervised, good ideas can receive funding and become successful companies.
  • If there is transparency, there is less opportunity for crony capitalism and people cannot hide in the “shadows” to undertake corrupt activities.

With an effective environment for corporate governance, companies tend to invest more money, grow, and hire more workers. The best news is that enacting and implementing policies for effective corporate governance can be very inexpensive especially when compared to the multi-trillion dollar investments arising from the planned SDG initiatives.

Measuring the Progress of Country-Level Governance is Possible

The widely-accepted economic concepts for successful countries have been codified by Magni as Sustainable Wealth Creation (SWC) principles. Magni further disaggregated the principles into 12 Economic Standards which are in turn measured through 280 Qualitative Sovereign Factors. The higher the aggregate score, the greater a country’s adherence to the principles associated with better and more inclusive economic development.

Magni has scored countries on their adherence to SWC for more than 15 years. While progress can be slow, countries tend to improve over time. Developed countries, not surprisingly, generally score higher than emerging countries, though some emerging countries have scores comparable to the lowest scoring developed countries. Countries with low scores tend to improve faster than countries with high scores (i.e., countries, through concerted efforts, can “catch up” to higher scoring countries). Portfolios constructed from allocations based on these scores have outperformed relevant benchmarks[8].

Sustained and Sustainable Development

Bertelsmann Stiftung, Germany’s largest non-profit foundation, recently made an important contribution to the achievement of SDG by assessing the readiness of rich countries to adopt SDG[9] (SDG Rankings). The SDG Rankings provide policy makers around the world with guidance regarding priorities for a more sustainable world. As Magni compared the SDG Rankings to our rankings based on Magni Country Scores (Magni Rankings), we found interesting and, for the most part, expected similarities. We also found important differences. The following comparison may help policy makers when analyzing the interaction between sustainability and development.

The 17 goals of SDG focus on improving lives which increasingly means greater sustainability. Greater sustainability includes improvement in people’s live as well as improvement in the environment. Some SDG considerations address the inputs to development, including education, health, and equality. A well-educated and healthy population with equal access to opportunity helps assure that development can occur at a rapid rate and that the population has the potential to benefit from development. SDG does not include traditional direct measures of development and its resulting output, such as gross domestic product. The decision to not include such considerations is probably a reflection of their existing prevalence and the relative inability to turn the measures into guidance for policy formulation. One area with relatively little consideration in the SDG relates to the conditions for future development and wealth creation.

Given the greater emphasis on sustainability than development in the SDG, some may question the potential conflict between sustainability and development. A comparison of the SDG Rankings to the Magni Rankings can identify where there are sustainability decisions with little risk of adverse impacts on development and perhaps even where sustainability decisions can help development. The comparison can also help on matters where there may be tradeoffs between sustainability and development. The implications from the comparisons can help policy makers pursue initiatives that make the world more sustainable and still have a significant positive impact from development.

Comparing Country Rankings

This analysis uses the 29 countries common to both Magni and SDG rankings[10]. Seventeen of those countries have similar rankings[11]. The similarly-ranked countries have made comparable progress in achieving the SDG and progress in creating an environment for effective corporate governance. Countries with balanced sustainability and development achievements can continue to make progress, while also being some of the more attractive investment opportunities for investors.

The most important conclusion from the comparison was the compatibility, as opposed to conflict, between sustainability and development. Countries can improve their environment for effective corporate governance which provides greater wealth and creates funding for SDG initiatives. At the same time, countries can pursue initiatives to improve the quality of life by achieving SDG.

Of interest are countries where there is a difference of at least five places between the two rankings. Those countries and the associated policy implications are detailed below.

There are seven countries where the SDG Ranking placed countries at least five places higher than the Magni Ranking. These countries are ones which appear better prepared for sustainability than they are for development. The seven countries are:

  • Austria
  • Belgium
  • Czech Republic
  • Denmark
  • Finland
  • Ireland
  • New Zealand

An analysis of the performance of each of these seven countries on each of the SDG goals can highlight the interaction of sustainability and development. If there is a pattern of strong performance on the SDG goals across the seven countries, then there may be a policy tradeoff where sustainability may inhibit development. If there is no pattern of performance on the SDG goals across the seven countries, then policies to improve sustainability may have no impact on development.

There was no pattern in the SDG performance of the seven relatively-high-SDG-Ranking countries. Simply put, there appears to be no obvious part of the SDG that inhibits development. On the other hand, supervision of the financial services industry, integrity of markets, and transparency of fiscal policy are noticeably weaker in these seven countries than in the 17 countries with similar Magni and SDG rankings. Weaknesses in financial services supervision and market integrity create opportunities for crony capitalism and corruption. The result can be impaired shareholder rights to the future profits of companies operating in the country. The relative lack of fiscal transparency increases risks when considering capital investments (i.e., increases the risk discount used when considering capital investment) with a resulting decrease in deployed capital, thus reducing development and wealth creation. These countries have the opportunity to grow faster and produce more wealth by improving their environment for effective corporate governance.

There were five countries where the SDG Ranking placed countries at least five places lower than the Magni Ranking. These countries are ones which appear less well prepared for sustainability than they are for development. The five countries are:

  • Australia
  • Hungary
  • Italy
  • Mexico
  • Portugal

An analysis of the performance of each of these five countries on each of the SDG goals can also highlight the interaction of sustainability and development. If there is a pattern of strong performance on the SDG goals across the five countries, then it is an indication that good sustainability policy can help strengthen development. If there is no pattern of performance on the SDG goals across the five countries, then policies to improve sustainability may have no impact on development.

There was no pattern in the SDG performance of the five relatively-high-Magni-ranking countries. Simply put, there appears to be no obvious part of the SDG that inherently helps development. These countries already have environments which support effective corporate governance and the wealth created through development is more likely to benefit the whole population. Their opportunity is to increase social equity, justice, the quality of life and the health of our climate without hurting development.

Achieving SDG

Over the next 15 years the countries of the world can make major progress creating an interconnected society built on sustainable development. For those who are concerned about the potential harm to development from policies to increase sustainability, they should take comfort from the analyses presented herein. The most important actions to take are ones that improve adherence to SWC principles, such as transparency. Effective implementation will tend to mean the country has more funding capacity, generates more inclusive wealth, achieves greater progress on social and environmental concerns, and improves their outcomes against the SDG.

[1] “Sustainable Development Goals: Are the rich countries ready?” by Christian Kroll, Bertelsmann Stiftung, September, 2015 contains an assessment of progress on the SDG by OECD countries.

[2] Ibid

[3] Addis Ababa conference on Financing for Development

[4] “Sustainable Development Goals: Are the rich countries ready?”

[5] “Sustainable Development Goals: Are the rich countries ready?”

[6] “Sustainable Development Goals: Are the rich countries ready?”

[7] CIA’s World Factbook

[8] Performance information is available on the Magni website (

[9] “Sustainable Development Goals: Are the rich countries ready?”

[10] SDG Rankings include 34 countries. Magni Rankings include the 46 countries of the developed and emerging markets as defined by MSCI. SDG Rankings include 5 countries not part of the developed and emerging markets (i.e., Iceland, Slovenia, Luxembourg, Estonia, and Slovakia). SDG Rankings do not include 2 equities markets among the developed markets (i.e., Hong Kong and Singapore). In addition, the SDG Rankings do not include 15 equity markets in the emerging markets (i.e., Brazil, China, Colombia, Egypt, India, Indonesia, Malaysia, Peru, Philippines, Qatar, Russia, South Africa, Taiwan, Thailand, and United Arab Emirates).

[11] Similar rankings is defined as difference in rank of no greater than 3. Prior to comparing the two rankings, the respective scores from the two methods for the common countries were reranked (i.e., renumbered to facilitate comparison). The 17 countries are Canada, Chile, France, Germany, Greece, Israel, Japan, South Korea, Netherlands, Norway, Poland, Spain, Sweden, Switzerland, Turkey, United Kingdom, and United States.