The next step is to identify the sustainable development outcomes or SDGs most relevant to your stakeholders. Engaged with your stakeholders to determine their values and impact interests. We cannot stress this enough. You'll want to do this first without filtering for financial factors. Later, we'll consider how to prioritize these outcomes by other factors including investability. The goal of this exploration is to emerge with a set of SDG outcomes your stakeholders care most about. Each SDG outcome starts with a what, who combination. Our suggestion is to engage with stakeholders to surface what they care about and who is impacted within those areas. First ask, what outcomes matter most to them. A good first step is to become more familiar with the SDGs and their targets, to start to identify those that could be most relevant to your stakeholders based on two entry points. First, risks to people in the environment, negative impacts to avoid and second, beneficial products or services or investments or positive impacts to increase. Why take the time to do this? Well, if you don't and you're investments are out of sync with stakeholder values, you might find yourself being forced to consider stakeholders interests under duress at some future point. For example, much of the global divestment from funds supporting South Africa during the apartheid can be traced back to fund donors being frustrated as they came to see their investments supporting racism. Today, many university endowments are under pressure to revise their investment policies from one of their most important stakeholder groups, students. Values can change and stakeholders express themselves more strongly when the gap between values and investment decisions grows. The beginning of the goal-setting process is the right time to proactively engage stakeholders to understand what their priorities are, then set up a process to re-evaluate regularly. The more stakeholders you have, either a number or in type, the more effort you may wish to spend on this part of the process. You can survey them, do interviews, set up committees that report to you, etc. For more guidance on how to engage stakeholders, see engaging all affected stakeholders, a publication from the World Economic Forum, and also Involve Stakeholders Version 2.0, a publication from Social Value International. Second, ask who is impacted positively or negatively by your current investments and who could be impacted by your future investments. If you already have a portfolio of investments, who are the stakeholders of those businesses? Remember that stakeholders certainly include customers and beneficiaries, but also include suppliers and partners, the local community and the environment. Are any stakeholders currently underserved, which are being served well and could be more so. In connecting your who back to the what, be as specific as you can about the intended population for whom you wish to make SDG outcomes happen. In 2020 and 2021, for example, many investors, we're adding gender or racial equity lenses to their investments to improve their impact on a specific kind of who. Let's look at examples of how an investor may do this in practice. Akhil's private equity fund was created to invest in four main areas, climate change, health, financial inclusion, and education. Often from private funds. Impact goals are expressed in very broad terms and legal documents to give fund managers like Akhil more room to identify potential investments, but he also needs to have more specific goals internally. Akhil consulted the SDGs and targets and had a series of meetings with potential LPs, current investees he has been working with and staff to discuss priorities in these investment areas. Akhil's stakeholders wanted to continue investing in the same four areas with more attention paid to the specific related SDGs. Akhil created a pitch deck for future LPs that included some draft impact goals within the four investment areas. When engaging with potential investors, he probed their and their institutions alignment with these goals and got feedback about what resonated. Through these conversations, his team created the following list of SDG outcomes, each with a what, who combination. Paula decided to create a six month engagement process with her investment committee, in which they would define the impact goal questions they wanted to ask and answer. Paula also hired a consultant to help them probe the interests of pension holders around sustainable development in SDGs and benchmark the rationale activities and performance of other pension funds around these issues. By doing this, she was able to learn more about what impact issues resonated with the pension fund holders and which were significant priorities to most. Paula also worked with consultants to consider relevant local and national sustainable development contexts and to embed respect for human rights and other responsible business practices as part of her approach. It's very common for larger institutions like Paula's to engage third parties for this kind of stakeholder strategy work. The priority issues that emerged with greatest consensus among her stakeholders where climate change and equity and inclusion. Perhaps unsurprising given the scale of the pension fund, the who category for both of these what's is global. But Paula will certainly be able to take advantage of further guidance in the SDG targets to get more specific in her strategy, more on that to come. Making it real. Identify the what outcomes that matter most. All investments have impacts on both people in planet. Consider the SDGs in light of your current and future investments through both positive and negative impact lenses. What do your stakeholders want to see more of in the world or less of? Consider who is impacted by your investments or could be. If you already have a portfolio of investments, think about the most relevant SDG outcomes for those investments. Which stake holders of those businesses might be currently underserved. Make a plan for engaging with your stakeholders to collect input and how you can contribute positively to sustainable development and the SDGs. How will you establish and promote alignment of interests among general and limited partners, investees, and other stakeholders of your capital. Recognize challenges, talking about a change in goal can be challenging for some stakeholders, especially where ties are formal or informal such as within families are boards. Who could be threatened by goal changes around impact? Who could help align your stakeholders with the new impact goals? Consider engaging a third party. Do you need a third party to help articulate and align goals among primary or secondary stakeholders? The intentional endowments network is an example of an organization that created changes in investment goals by leveraging secondary stakeholders. Early on, this group organized students within higher education institutions to voice their support for the adoption of education endowment investment strategies that create an equitable, low-carbon and regenerative economy. Many consultants are filling this function, helping complex groups get to consensus. Make it periodic, setup regular feedback loops to get ongoing insight into your stakeholders evolving issues and needs. You'll want to repeat this process on a regular basis. How will this happen and how often? Create a list of desired possible SDG outcomes, the who, what combinations that you and your stakeholders consider important from an impact point of view. This list is unfiltered and on prioritized, and that's okay for now. At the end of this step, you'll have a list of proposed topics, ideally expressed as SDG outcomes defined by what and who combinations that you and your stakeholders agree are important sustainable development outcomes to consider pursuing.
