Stockholm (NordSIP) – As impact investments continue to grow, investors remain interested in investing in climate change mitigation and the fight against poverty. However, despite this interest, many investors often still lack the knowledge and understanding of the problems they wish to solve, the available interventions, or are uncertain about how to utilize their assets to create meaningful change.
A New Guide to Impact Investing
To address this knowledge gap, FIIND Impact Foundation has published a guide to effective impact investing solutions for reducing global poverty across various asset classes, including listed bonds, listed equities, private debt, private equity, infrastructure, and real estate funds. The publication is seeks to provide guidance to Institutional Investors and Faith-based Investors looking to contribute to solving climate change and eradicating multidimensional poverty through their investment portfolios.
According to the FIIND Foundation, it answers questions such as: “What are the most effective solutions and interventions for reducing global poverty?”, “Which of them are investable with funds and other financial instruments, and where (geographies) and how should one allocate capital to maximize impact?”, and “Which financial instruments and asset classes present the most opportunity today?
Poverty Solution Groups
Written by Dr. Sophie Robé, CFA, and Maarten Toussaint, co-founders of the FIIND Impact Foundation, the guide claims to have identified “seven multidimensional poverty solution groups”:
- Healthy lives (Health)
- Quality education for all (Education)
- Clean energy for all (Living standards)
- Nutrition security (Health)
- Clean water, sanitation, and hygiene (WASH) (Living standards))
- Asset ownership and wealth development (Living standards)
- Adequate housing for all (Living standards)
- Preserving climate and planet (Environment)
For each solution group, te guide provides several examples of interventions (projects, business models, or initiatives) that actively help reduce poverty, along with estimates of the potential magnitude of impact that these interventions can generate.
How to Invest to Fight Poverty
The guide offers six main takeaways regarding the diversity and complexity of poverty, the most significant impact investments for poverty relief, the asset classes with more opportunities for poverty relief investments and the connection between poverty and climate change.
The report notes that poverty manifests itself differently and to different extents across geographic regions, sometimes even within countries. This means that the fight against poverty requires context-appropriate solutions.
The guide notes that investments in access to water, sanitation, and hygiene (WASH) as well as in Healthy Lives and Clean Energy for All offer significant and effective impact opportunities. “An enormously vast number of people that are currently lacking access to essential healthcare services or are living without electricity and clean cooking solutions,” the FIID Foundation explains.
According to the report, “the most investable interventions include those that increase access to clean energy, financial inclusion, and food productivityas they represent the largest universe of impact funds and products available to investors.” Considering the available asset categories, the guide highlights private equity funds as offering “exposure to the greatest number of interventions, with significant opportunities also available through listed bonds and equities, private debt, infrastructure, and real estate.”
FIID also highlights the importance of mission-driven organisations such as faith-based organizations, development finance institutions, and non-profits as essential for “building the market and paving the way for other institutional investors to enter the scene”, a crucial step in bridging the financing gap faced by this sector.
Last but not least, the guide also notes the inextricable link between climate change and poverty are inextricably linked. The threat of “climate change disproportionally affects the most underserved and poor communities. However, it also offers an opportunity. An opportunity when investments for poverty reduction also address planetary degradation and climate change,” FIIND concludes.