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Build Back Better: How impact investors can support social inclusion

While all of us have been affected by COVID-19 pandemic, the outbreak has highlighted existing inequities across and within countries. Emerging evidence highlights that the economic and health consequences of the pandemic are being borne disproportionately by the poor and minority groups. It is clear that social inclusion, which is critical to sustainable development, remains unfinished business. As the voices of protest and social activism continue to increase in volume, urgent and transformative action is needed.

Governments and all stakeholders have a role to play in building inclusive societies. However, we should not underestimate the potential power of the business and investment communities to steer the future and drive positive change. The considerable challenges that face us today also present opportunities for investors to innovate and to support companies that contribute to sustainable and inclusive long-term growth.

How does this happen? Supporting innovative companies that deliver solutions to social and environmental challenges is a core tenet of impact investing. Investors can also encourage better business practices across a wide range of companies to build a more sustainable business profile. This effort has the potential to build long-term shareholder value and support the move to a more sustainable global economy.

To turn a desire for social impact into practice, the Sustainable Development Goals (SDGs) provide a useful framework for impact investors. While the economic, social and environmental challenges are ultimately indivisible, SDGs 1-5 and 8-12 (see below) appear most applicable to investors seeking social impact, with a sharp focus on reducing inequalities of wealth, health and opportunity.

Source: https://www.un.org/development/desa/dspd/wp-content/uploads/sites/22/2018/08/E_2018_SDG_Poster_with_UN_emblem.png

The goals-based focus to tackle specific challenges, leads investors to investable themes and companies which contribute positively to financial inclusion, education, good health and wellbeing, alongside basic needs and sustainable products. In this respect, the profit motive is aligned with removing barriers, sharing knowledge and enabling innovation.

Real-world examples help bring the approach to life in a listed equity context. For example, to tackle the issue of financial inclusion, we see companies such as HDFC helping to reduce barriers to finance and supporting affordable homes in India. Safaricom, a Kenyan mobile network operator, providing M-PESA, a mobile money transfer, financing and microfinancing service which serves over 20 million Kenyans and contributes positively to the problems of poverty, financial inclusion and inequality.

The challenge of COVID-19 reinforces the importance of good health, and companies such as Moderna are one of the leaders in the race to create a vaccine. Gilead Sciences produces Remdesivir, an antiviral medicine to treat COVID-19 patients. Teladoc Health is a provider of remote medical care which is helping to provide vital medical care in the context of social distancing guidelines.

Companies such as FDM promote social mobility by providing training and job opportunities for ex-forces personnel, and people returning to work following extended absences. Pigeon Corp supports the delivery of basic needs and sustainable products as a leading provider of baby care and maternal care products in Japan, alongside managing childcare and elderly care facilities. Danone is committing to build a healthier future through food with a strong focus on underserved emerging markets and adopting a stakeholder-oriented corporate structure.

Looking forward, the tragedy of COVID-19 has prompted new scrutiny and an extra impetus to tackle social challenges. Investors have the potential to play an important role in shaping the future for good and building positive change. They can do this by investing in companies offering products and services to support social inclusion goals and by actively encouraging better business practices. Set against the backdrop of an emerging 'New Normal', this effort is vital to future-proof portfolio returns but also to help foster a prosperous, healthy and inclusive world for our retirement.

To learn more about impact investing, download Aon’s paper Investing for Impact or contact Aon’s Responsible Investment team.

 

Aon Solutions UK Limited is authorised and regulated by the Financial Conduct Authority.

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