Opinion



September 4, 2019,   2:49 PM

Investing With Impact: Can We Measure Up To Our Sustainability Mantra?

Jamie Jenkins

FULL BIO

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It is no longer enough for investors to simply allocate assets with environmental, social and governance factors in mind. There is a growing need to quantify the impact they have. This is easier said than done; it is a seemingly relentless challenge to make a meaningful difference to climate change, water, gender equality and other hot topics in the sustainability debate.

However, within some of the global themes—ranging from technological innovation, health and well-being, and access to finance, to resource efficiency, sustainable mobility and energy transition—there is more and more evidence of companies across the world tackling key issues through the products and services they provide.

But perhaps one of the most critical enablers for development and economic growth is access to finance. In the words of António Guterres, UN secretary-general: “We must seize the enormous potential of financial innovations, new technologies and digitalization to provide equitable access to finance, especially for those hardest to reach.”

Essential to this objective is the ability to offer financial products and services in an accountable, transparent, ethical and sustainable way. This enables customers to be protected and treated fairly.

Financial inclusion can also help to alleviate poverty. Evidence increasingly shows that providing people with the ability to save and borrow efficiently and securely can improve well-being, gender equality and household consumption. It can also foster enterprise.

Big strides have been made—around 1.2 billion adults have obtained access to a bank account this decade. Yet close to a third of adults globally, or roughly 1.7 billion people, remain unbanked.

Among positive examples set by some high-profile brands, HDFC Bank’s “Sustainable Livelihood Initiative”, aimed at empowering women, has supported over 32 million people in India over the past five years.

In terms of technology-enabled innovation to help individuals without access to traditional banking services, PayPal has made it possible to pay bills digitally without a bank account. Mastercard is training 15,000 female entrepreneurs in Indonesia. Allianz, meanwhile, has become a partner in BIMA, a business allowing individuals to buy insurance through their mobile phone.

Looking forward, the grand sustainability objectives investors share today means that financial institutions must go further than using metrics such as number of bank accounts opened, or number of people reached through financial education programs, to showcase the impacts of their financial inclusion efforts. Instead, these providers must attempt to capture the ultimate real-life outcomes, such as the impact on people's financial resilience.

All these examples stem from the growing recognition across countries and industry sectors of the importance of the UN’s 17 Sustainable Development Goals (SDGs).  These also provide an effective benchmark, as investors can assess the extent to which revenue their companies make is aligned with the 169 underlying ESG-related and other sustainability targets of the SDGs.

Armed with these insights, the influence investors can wield is powerful. Promoting change as an actively engaged party can, ultimately, address material ESG risks, such as poor governance, plus support the SDGs by driving transformation on issues such as labor standards and human rights, or simply how companies make vital products and services available to global consumers.

Jamie Jenkins is the Co-Head of Global Equities at BMO Global Asset Management (EMEA).

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