UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS

Citi GPS: Global Perspectives & Solutions8June 2018Beneath these 17 goals are 169 specific targets, which attempt to break down the17 goals with the UN also specifying which indicators it believes are the correctones to assess progress towards each individual goal or target.The eradication of poverty and inclusivity arestrong threads running through the SDGsAt the heart of the goals is the eradication of poverty, which if successful, could helpto tackle so many of the other challenges facing the world; this concept ofinterlinkage between the goals is a recurring focus of this report. Inclusivity is also astrong thread running through the goals — not only in the obvious headline SDGs ofInequality and Gender Equality, but within most goals there is specific reference toensuring access or inclusivity for disadvantaged or at-risk groups.The goals cover an enormous breadth ofareas and subjects with 17 goals brokendown into 169 targets and even moreindicatorsThe goals themselves cover an enormous breadth of areas and subjects, from thephysical and environmental, to social and human, to economic, policy andgovernance. Moreover, when one starts to delve down into the 169 targets, and theeven more numerous indicators which lie beneath each of them, the sheer scopeand scale of the project can seem overwhelming. This is a recurring theme whichwe encounter with corporates, and in particular investors – how do they align theirbusiness practices with the SDGs, both to aid in the achievement of the goals, butalso potentially to benefit financially from business areas which, if tackled, will growdramatically? Most importantly, where to start?The complexity though does not end there. While each of the 17 goals may seemrelatively self-evident at first glance, when one starts to work through the goals itbecomes quickly apparent that they are not individual and discrete goals; forexample, how can one claim to have eradicated poverty, without succeeding ineliminating hunger, providing energy, water, and sanitation to all, and without'solving' decent work and economic growth? How can one tackle climate changewithout succeeding at Affordable and Clean Energy, Sustainable Cities andCommunities, Industry and Infrastructure, Life on Land and Life below Water, andvia Responsible Consumption and Production? These are just a few examples ofthe numerous interlinkages which pervade the goals.The interlinkages between goals areinherently positive but significant negativefeedback loops existMoreover, not all of these interlinkages are inherently positive; significant negativefeedback loops exist. Climate Action for example is 'easy' to tackle if we spend 9trillion, but its interaction with Affordable and Clean Energy is obvious — we candecarbonize very quickly, but at an enormous (headline) cost — and the provision ofuniversal access to energy is also readily achievable, but will push the cost of theenergy up considerably, making it inherently less affordable (if at all). And this is notjust at a human level — if energy costs to industry rise significantly, what will this doto Decent Work and Economic Growth, as rising company costs leave less forinvestment? Industry, Innovation, and Infrastructure would also likely suffer similarlyfrom greater cost constraints within corporates. These are not highlighted as the keynegative feedback loops – just as examples that not only are all of the goalsinextricably linked, but that many of these linkages are negative, rather than beingone big virtuous circle.Different groups use the SDGs for differentpurposesDifferent groups use the SDGs for different purposes. Some entities use the SDGsto help society and address enormous social issues, while others identify investmenttrends and likely growing demand for products and services. While some will be atthe charitable/not-for-profit end of the spectrum, others will be unashamedly seekinggrowth and profit while most may be somewhere in between. The same is true forthe investment community — at the so-called 'impact' end of the spectrum, someinvestors may be more concerned with societal returns than financial ones, whilethe other end of the spectrum is unashamedly 'following the money'. 2018 Citigroup

June 2018Citi GPS: Global Perspectives & SolutionsThe purpose of this report is to try to simplifythe SDGs to determine a set of critical pathswhich can lead quickly and most effectivelyto their achievementBut that is not to sound negative, and not for a moment to suggest that we shouldn’ttry to achieve the goals, or indeed that we can't succeed at many of the goals by2030. The purpose of this report is to try, as far as possible, to simplify the SDGs —to break them down into similar groups, to examine those interlinkages, todetermine the drivers and results, and thereby to determine a set of critical pathswhich can lead quickly and most effectively to their achievement. It allows us toidentify who is best placed to do what, from the public sector to the private sector tothe investment community, and it attempts to lay out both the cost of achieving thegoal from an incremental perspective, and the human benefit that might be achieved bysolving it. This then allows us to look at what our most pressing challenges are,where the biggest financial opportunities are, and perhaps most importantly, wherewe can achieve the greatest human benefit for the least financial cost.We are acutely aware that some will disagree vehemently with this approach, at ourseeming to 'prioritize' some goals over others (we absolutely are not), or to implythat some are 'bigger' than others — or even that they can be separated at all. Weactively welcome that debate and feedback. The goals are used by such a diverserange of groups, and for such wildly differing purposes, that to produce a frameworkapplicable to all, and which works for all is nigh on impossible. We are simply drivenby recurring feedback from investors who are trying to align their investmentprocesses with the SDGs, who want to invest sustainably, but are baffled by theenormity of the task, their breadth and reach, and are unsure of how to think aboutthe SDGs collectively, the scale of the opportunities, and where they should start.We hopefully can breakdown the sometimesdaunting SDGs into a roadmap for allelements of societyBy identifying the lowest hanging fruit, the feedback loops, the critical paths, thescale of the opportunity in both human and financial terms, and who should do whatin what order, we can hopefully break the sometimes daunting SDGs down into aroadmap for all elements of society, which can help us build a better, fairer,wealthier, more inclusive, cleaner, and more sustainable world both for thisgeneration, and for our children.How to Use this Report:Section 1 of the report examines what the UN Sustainable Development Goals areas a concept, what they are used for, how they are used, and by whom. We thenexamine the interactions between the goals, both positive and negative. We breakthe goals down into three groups focusing on the physical/environmental, social,and economic, and then further break the goals down into what we see as 'drivers',and those which are more the 'results' of other goals. Finally in Section 1, we usethis analysis to derive so-called 'pathways for success', which highlight entry pointsinto investing in the SDGs, which goals those investment areas can drive, andwhich SDGs those in turn drive. Each of the goals has both a financial and a humannumber associated with it, which are derived in Section 2. The 'human' numberreflects the current number of people currently affected by the goal, or the lives ofwhom would be improved by its achievement. The 'financial' number is designed tohighlight either the cost of achieving the goal, the avoided liability of achieving it, orin some cases the financial benefit of achieving the goal.Section 2 of the report contains a four-page section on each individual SDG,describing what the SDG is, why it is an SDG (i.e., what is the problem it is trying toaddress), what the UN sub-targets and indicators are, what our chosen metrics areto derive the financial and human figures described above, what those figures areand how we get to them, and finally an examination of where geographically thegreatest opportunities lie. 2018 Citigroup9

Citi GPS: Global Perspectives & Solutions10Section 1: Examining theUN SustainableDevelopment Goals 2018 CitigroupJune 2018

June 2018Citi GPS: Global Perspectives & SolutionsHow Do Investors Use the SDGs?While hopefully also useful to governments, development agencies, and supranational organizations, the main focus of this report is on the private sector, inparticular the corporate and investment communities (especially the latter), as tohow they can best align their business and investment processes, not only to helpaid the achievement of the goals, but also to potentially benefit from aligning withthe trillions of dollars which will need to be mobilized to achieve them — therebyoffering scope for both a societal as well as a financial return — for the benefit of allstakeholders.Differing Investment PhilosophiesThe SDGs are a uniform project, outliningthe system-wide achievements needed inorder to reach suitable levels of well-beinggloballyFor the purposes of development, the SDGs are a uniform project, outlining thesystem-wide achievements needed in order to reach suitable levels of well-beingglobally. While this provides a framework for targeting development activity andfunding for development agencies, funders, and other stakeholders, for investorsthe SDGs are unlikely to be a uniform project. Investors will use and interact withthe SDGs in very different ways depending on their motivations, philosophies, andmandates therefore understanding the different approaches to ESG (Environmental,Social, Governance) investing is a critical starting point. In the table below, we breakthis down into five different approaches to ESG or sustainable investing.Figure 3. Differing Approaches to ESG InvestingESG Communication The use of ESG themes and information primarily as a reporting tool onalignment of current activityTactical ESG The use of ESG information, trends and themes to generate investmentadvantages and performanceImpact Investing The use of investment to achieve social or environmental outcomes in the realworldUniversal Ownership The practice whereby large investors span the whole market, and can invest toachieve or avoid certain outcomes, and exert influ

The UN Sustainable Development website also goes on to highlight Peace and Partnership, the latter being key to achieving the goals, and noting that without the former, there will be little sustainable development — and we note, vice versa. Figure 2. The UN's 17 Sustainable Development Goals Source: United Nations . Figure 1. The UN SDGs