The latest report from FIIND Impact Foundation, Can you help solve multidimensional poverty with your investment portfolio?, contains an intriguing proposition to faith-based organisations and institutional investors.
Arguing that traditional approaches to poverty reduction through charitable giving are insufficient, it proposes that strategic investment can play a crucial role in addressing global inequality.
To help investors use their investments for maximum impact, the report offers a practical guide for assessing which areas they want to focus on and, crucially, which interventions might actually be effective in reducing poverty.
The report comes from FIIND Impact Foundation's Faith Impact Project, supported by Porticus. While it's relevant for faith-based organisations, which have a responsibility to manage their assets in ways that are consistent with the values they preach and represent, FIIND says it is pertinent for all investors seeking to create social or environmental impact with their investments.
The report identifies climate change and poverty as two of the 21st century’s biggest challenges – and says they are linked. 'As our research shows, there is an inextricable link and interconnectedness between multidimensional poverty and climate change,' it says.
'On the one hand, global warming aggravates the living conditions of people that were already struggling with poverty. On the other hand, it also offers opportunities to invest in effective interventions to eradicate multidimensional poverty, some of which can also contribute to mitigating climate change.'
Lack of knowledge or understanding
However, despite the growing momentum to create a more environmentally and socially sustainable world, the report says investors often lack knowledge or understanding of the problems they wish to solve, or which interventions could create meaningful change.
The intensively researched report (there are 619 footnote links to other research/reports) was inspired by the Oxford Poverty and Human Development Initiative's Global Multidimensional Poverty Index, and so FIIND also takes a multidimensional approach to poverty – ie, it defines poverty as not only comprising a financial deprivation but also deprivations in many other aspects of life, such as health or access to essential utilities.
Eight multidimensional poverty solution groups
The eight key areas for investment opportunities are:
Healthy lives
Quality education for all
Clean energy for all
Nutrition security
Clean water, sanitation and hygiene (WASH)
Asset owership and wealth development
Adequate housing for all and
Preserving the climate and planet.
For each area, the report provides an overview of the current state of affairs and some key questions.
For example, under 'Healthy lives', what does it mean to be deprived of health? What is the state of health poverty today – and what kind of interventions could enable healthy lives? Finally, it examines what investable interventions exist for enabling 'Healthy lives'.
Investment options
For each of the eight groups, the report offers examples of different investment options and assesses which financial instruments and asset classes present the most opportunity.
It concludes that the most investable interventions include access to clean energy, financial inclusion and food productivity. 'Notably, despite vast numbers of people lacking access to safe drinking water and toilets, WASH unfortunately presents the least number of investment opportunities,' it says.
Notably, despite vast numbers of people lacking access to safe drinking water and toilets, WASH unfortunately presents the least number of investment opportunities
FIIND’s observation echoes discussions at FaithInvest's Liveable Futures conference in May 2023, where participants debated whether funds that would normally be used for grants (ie, once given are gone for good) could be used in alternative ways of funding development, including as catalytic capital. In this way, mission-driven organisations that are interested in this approach could play a vital role in developing and de-risking projects (such as, for example, difficult-to-fund WASH projects), helping create investment opportunities that will eventually meet the requirements of market-rate return investors.
Conclusion
Finally, the report admits that eradicating poverty is an enormous challenge, and the idea of achieving this 'may sound overly idealist'. But it adds: 'By carefully dissecting the concept of poverty, discussing its various manifestations (ie, its multidimensional nature) and identifying distinct investable solutions and interventions to the problem, FIIND Impact Foundation hopes to have laid out some actionable steps for investors.'
This report is an excellent tool for investors seeking to understand more clearly the nature of critical issues involved in global poverty, and offers practical ideas for the kind of investable interventions that could help.
Download the full report from the FIIND Impact Foundation website.