Invest in UN SDG 11: Sustainable Cities with ESG ETFs

The United Nations Sustainable Development Goals (SDGs) are 17 goals that all UN Member nations have agreed to achieve by 2030. They set out an ambitious mission to eradicate issues that affect our society and environment. Sustainable Cities and Communities have a central place in UN's agenda through its SDG #11 “Make cities and human settlements inclusive, safe, resilient and sustainable" and underpinned by 10 ambitious targets. In this article we highlight how you can contribute to UN SDG Goal 11: Sustainable Cities and Communities with ESG Exchange-Traded Funds (ETFs).

17 SDGs for a better future

The Sustainable Development Goals (SDGs) are 17 goals with 169 targets set by the United Nations in 2015 as a global initiative to tackle issues that affect humans and the environment we live in, with the hope of achieving tremendous progress by 2030.

The 17 sustainable development goals (SDGs) to transform our world:

1.      No Poverty

2.     Zero Hunger

3.     Good Health and Well-being

4.     Quality Education

5.     Gender Equality

6.     Clean Water and Sanitation

7.     Affordable and Clean Energy

8.     Decent Work and Economic Growth

9.     Industry, Innovation and Infrastructure

10.   Reduced Inequality

11.    Sustainable Cities and Communities

12.   Responsible Consumption and Production

13.   Climate Action

14.   Life Below Water

15.   Life on Land

16.   Peace and Justice Strong Institutions

17.   Partnerships to achieve the Goal

Each goal has several targets and is measured quantitatively by indicators provided by private and public entities. The creativity, knowhow, technology, and financial resources from all stakeholders are necessary to achieve the SDGs in every context. The beauty of these goals is their interrelation, meaning that action in one area will affect outcomes in others. The development of those goals must balance social, economic and environmental sustainability.

To fully meet the 17 Sustainable Development Goals, the United Nations Conference on Trade and Development (UNCTAD) estimates that an investment of $3.9 trillion is needed on average each year from 2015 to 2030 for the developing nations alone.

What is UN SDG 11: Sustainable Cities and Communities?

Sustainable Development Goal #11 is about making cities and human settlements inclusive, safe, resilient and sustainable. This can be achieved by building safe and affordable housing and creating resilient societies and economies. It also requires massive investments in public transport, creating green public spaces, and improving urban planning.

According to the United Nations, 55% of the world’s population lives in urban areas today, a proportion that is expected to increase to 68% by 2050. Cities across the world occupy just 3% of the Earth's land, but account more than two third of energy consumption and 75% of carbon emissions. The number of slum dwellers exceeded 1 billion in 2018 or close to quarter of the urban population. In 2019, only half of the world's urban population had proper access to public transport. Access is defined as living within 500 meters' walking distance from a low-capacity transport system (such as a bus stop) and within 1 km of a high-capacity transport system (such as a railway).

Data retrieved from 911 cities from 114 countries in 2020 shows that the share of the global urban area allocated to streets and open public spaces averages about 16%. This is well below the UN-Habitat recommendation of 30% streets and an additional 10 to 15% open public spaces.

Increased urbanization requires increased and improved access to basic resources such as food, energy and water. In addition, basic services such as sanitation, health, education, mobility and information are needed. However, these requirements are unmet globally, which causes serious challenges for the viability and safety of cities to meet increased future demands.

There's a long way to go before reaching an ideal sustainable living environment, but SDG #11 targets will set the tone to get there.

SDG #11 has 10 targets set for completion by 2030: 

1.           Provide safe and affordable housing.

2.          Develop affordable and sustainable transport systems.

3.          Enhance inclusion and sustainable urbanization.

4.          Protect the world's cultural and natural heritage.

5.         Reduce the adverse effects of naturals disasters.

6.         Reduce the environmental impact of cities.

7.          Provide access to safe and inclusive green and public spaces.

8.          Support stronger national and regional development and planning.

9.         Implement policies for inclusion, resource efficiency and disaster risk reduction.

10.       Support least developed countries in sustainable and resilient building.

To track progress, the United Nations along with all related stakeholders have established statistical indicators  attached to each target. It helps parties adapt and improve actions toward making the goal attainable by 2030. These indicators can be tracked on the SDG Tracker.

Investors can promote Sustainable Cities and Communities with ESG ETFs

Today, impact investing has become the norm, with billions of dollars injected in the market in adequately screened investments, focusing on entities that align their activities with SDG and ESG initiatives (Environmental, Social, Governance). Corporate Social Responsibility departments (CSR) went from being a cost burden to an existential necessity that represent employees and consumers values. 

The change in investors' mindsets has given birth to mutual funds and ETFs that provide exposure to securities that work towards achieving ESG or SDG goals. It allows them to invest in opportunities that can provide wealth accumulation while making an impact.

List of ESG ETFs promoting Sustainable Cities and Communities

Trackinsight analyzes the fact sheets and other publicly available information of all ETFs in the ESG universe. The information is screened for statements that show an explicit tilt towards specific Sustainable Development Goals. In relation to the "Sustainable Cities and Communities" goal, Trackinsight identifies 7 ETFs totaling $663 million. 

ETFs supporting SDG #11 ranked by assets under management

• iShares Smart City Infrastructure UCITS ETF (CITY): $437 million
• BNB Paribas Easy ECPI Global ESG Infrastructure (XU61): $310 million
• Lyxor MSCI Smart Cities ESG Filtered (DR) UCITS ETF (IQCY): $75 million
• Amundi Smart City UCITS ETF (SCITY): $49.70 million
• IQ Cleaner Transport ETF: $6.3 million
• Invesco MSCI Green Building ETF (GBLD): $ 4.66 million
• ProShares S&P Kensho Smart Factories ETF: $4.09 million

iShares Smart City Infrastructure UCITS ETF or CITY tracks the STOXX Global Smart City Infrastructure index and invests in companies that provide services and solutions for development and efficient running of smart city infrastructure in a sustainable manner. 

In general, a smart city is a city that uses new technology to provide advanced services and solve city problems. A smart city provides efficient transportation and better accessibility, improved social services and higher sustainability. It also promotes an urban environment that delivers a high quality of life to residents while also generating economic growth. Hence, investing in CITY could help promote SDG#11 by supporting businesses aligned with the goal's targets.  

In terms of country allocations, the United States (47%) has the largest exposure, followed by Japan (10%), Sweden (6.27%), United Kingdom (6.18%) and Canada (5.62%). Industrials (33.6%), Information Technology (28.5%) and Real Estate (25%) sectors have the highest allocations.

The fund has a total expense ratio of 0.4% and trades on multiple European exchanges, including Borsa Italiana (CITY), Euronext Amsterdam (CITY), NYSE Euronext Paris (CITE), SIX Swiss Exchange (CISB), Deustche Börse (AYEU), and the Mexican Bolsa Mexicana De Valores Exchange (CITY).

Since inception on March 3rd, 2020, CITY generated a gain of +43%.

Keep reading:

• UN Global Compact: What is it?
• ETFs aligned with EU Climate Benchmarks
• 5 things you should consider when buying ESG ETFs

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