Investing to end poverty

Launched in 2015, the United Nations 2030 Agenda for Sustainable Development established a globally accepted set of 17 overarching goals. These 17 Sustainable Development Goals – or SDGs for short – were an urgent call for action by all countries: a shared blueprint for peace and prosperity for people and the planet, now and into the future.

However, in 2021 – five years into the 15-year timeframe – M&G Investments released its second ‘SDG Reckoning’Report’ which revealed that the world is on track to deliver only six of the 17 SDGs*.

Over the next 17 weeks we’ll be taking each SDG in turn to see which are making the most progress and which are cause for worry. We’ll also be investigating the related investment opportunities. As many outcomes are interconnected (for example climate change and water scarcity, or food security and poverty), we will view the SDGs holistically.

“Delivering on the SDGs is a collective responsibility. Urgent and collaborative action will be required to deliver necessary progress in key areas. In terms of timing, however, there is no time to waste – we must act now.” — Ben Constable-Maxwell, Head of Impact Investing at M&G Investments

The UN’s Sustainable Development Goal #1

The eradication of poverty in all its forms is the greatest global challenge. This first Sustainable Development Goal has seven associated targets, which aim to eradicate extreme poverty for all people everywhere, reduce at least by half the proportion of men, women and children of all ages living in poverty, and implement nationally appropriate social protection systems and measures for all.

Poverty and the pandemic

Global extreme poverty (defined as those living on less than $1.90 per day) rose for the first time in a generation recently, from 8.4% in 2019 to 9.5% in 2020**. Furthermore, research from M&G Investments found that progress towards reaching the goal of No Poverty by 2030 has actually fallen in the last two years*.

In fact, compounding the threats posed by climate change, conflict and the pandemic it’s predicted that around 600 million people will still be living in extreme poverty by 2030**.

Whilst exacerbating the problem, the pandemic has also demonstrated the importance of social protection systems for protecting health, employment and income, with many new social protection measures introduced in 2020 as a result.

However, four billion people are still not covered by social protection, according to UN figures** and uncertainty remains over how those benefiting from pandemic-related protections will fare in the longer term, as emergency support is taken away.

How can investors help?

Supporting businesses that are providing access to economic services such as banking or telecommunications can help to lift individuals and communities out of poverty. Jamie Jenkins, manager of BMO Responsible Global Equity, told us more about the opportunities within sustainable finance when I interviewed him in October 2021. Jamie tells us more about holding HDFC Bank, an India bank targeting financial inclusion for some 200 million in India who are effectively excluded from financial services because they don’t have access to bank accounts.

Broader equity opportunities in the financial space could include the Jupiter Financial Opportunities – a concentrated portfolio of around 50 stocks, which currently has 41% in banks including Signature Bank, Nordea Bank and Bank of America in the top ten.*** For those look for fixed income exposure, Rathbone Ethical Bond is also heavily weighted towards financials, with positions in HSBC and Lloyds, for example***.

David Harrison, manager of Rathbone Greenbank Global Sustainability tells us more about what has been achieved so far, where improvements are required and how the investment community uses the SDGs in this podcast:

Interconnected goals

Women and young people are bearing the brunt of pandemic-related poverty, so poverty reduction targets must be considered alongside other related goals, such as SDG 5 Gender Equality. Employment also plays a salient part in lifting people out of deprivation, in line with SDG 8 Decent Work and Economic Growth, while food security is another key element, part of SDG 2 Zero Hunger.

*Source: The SDG Reckoning, M&G Investments, Oct 2021
**Source: UN Sustainable Development Goals, 2021 Report
***Source: fund factsheet, December 2021