Furthering the Fight Against Poverty
While we actually live in a golden age of wealth creation, poverty reduction remains one of the biggest challenges facing us today. 25 years ago, close to half the world’s population lived on less than a dollar a day. Rapid economic growth since then has lifted hundreds of millions out of poverty.
Growth is what solves most of the big economic and social problems: poverty, government deficits, quality of life, rising healthcare and retirement costs. Today less than 1-in-5 live in extreme poverty, which we now measure at $1.25 a day. But we live on a populous planet, so that is still more than one billion people.
There is a problem though. To achieve the same reduction in poverty again requires a much higher growth rate than we actually have today. And falling living standards in many places in the last years, especially among poorer sections of society, have produced surges of populism and heightened risk that ‘protest politics’ might damage economies. So UBS has produced a white paper, Furthering the fight against poverty, which focuses on practical ways that business can help.
You might wonder why UBS, which is the world’s largest wealth manager and serves some of the most affluent clients around the world, cares about this. Particularly at a time in which it would be much more popular to join the chorus on the now hot topic of inequality. We firmly believe that business has also a role to play and a responsibility to help address the issue of poverty.
And as a wealth manager with many successful entrepreneurs as clients, we see firsthand their importance in creating the enduring businesses that provide the jobs, generate the tax revenues, and support the supply-chain and infrastructure spending that underpins economic growth. While government clearly plays the major role in fighting poverty through policies on things such as education, tax and trade; business creates the wealth that matters.
Furthering the fight against poverty has identified ways business can make a difference. One is to ensure workforces in both the developed and emerging markets have the skills to meet changing labor market needs.
Businesses are among the first to see changes in the labor market, but few countries have the necessary close relationship between business and educators to ensure this information reaches the education system. Building this link will help.
Youth unemployment is a massive problem in both developed and developing countries; in the Middle East, North Africa and Southern Europe where unemployment rates range from 20 to over 60%. Re-skilling those whose current skillsets are mismatched to employment needs is a pressing issue where business can help directly, for instance with apprenticeships.
In addition, we see opportunities for major philanthropists – who are often also successful entrepreneurs – to engage as strategic partners, rather than simply donors, to tackle social challenges such as education, healthcare and financial inclusion. As I talk to our clients around the world, it is clear to me that many are already thinking deeply about how they can best contribute. Philanthropic funding can play a vital role in testing and stimulating innovation that, when proven, can be implemented at scale by business or government.
One way to do this is through impact investing, which aims to achieve both social and financial goals, creating a win-win that can appeal to mainstream private investors. Development Impact Bonds (DIBs) are also a tool that UBS is using to encourage "pay for performance" in a model where investors provide financing for an essential and effective development project and, if agreed outcomes are achieved, returns are provided by an "outcome payer".
The UBS Optimus Foundation has just launched the first ever DIB in education to fund a program to enroll girls in school and improve learning outcomes for all enrolled children in Rajasthan, India. Optimus is the investor, and The Children’s Investment Fund Foundation will pay a return depending on the results achieved in enrollment of girls and learning outcomes. We hope this bond will become a ‘proof of concept’ that encourages more money to go to effective education programs delivering measurable and positive outcomes which can lead to jobs and economic growth.
Jim Yong Kim, President of the World Bank, has been vocal about the critical role of the private sector in tackling poverty. I agree. Business people can make a real contribution by partnering with government and non-profits and applying business skills like innovation and creativity.
Sergio Ermotti is Group Chief Executive Officer of UBS, the world’s largest wealth manager
Vice President of Global Sales
10 年Many case studies and research done so far on this topic show that getting embedded in the local context and collaboration with local strategic partners are key success factors when engaging in low income regions. The creation of local sustainable life-enhancing offerings is an interesting approach to be considered when aiming to alleviate poverty around the world.
Independent Board Member, APIA Swiss, IBM, MBA University of California, Berkeley USA, SIOD
10 年Congratulations on the UBS Optimus Foundation initiatives and launching DIB in education in India. A simple idea is to fund "learning English" in all countries where less than 80% of the people can't read or speak English. If English is the premier language for business, growth, value add then it may also be a tool to further the fight against poverty. - In English-speaking developed countries, private sector and billionaires have a moral responsibility to invest and support education. Banks could encourage the wealthiest account holders to contribute 8/1000 for example, of their private assets annually to good education projects, or even make this mandatory just like service fees. The top billionaires should be redistributing a lot more and getting DIB-like investments proposals from their bank could work to motivate them to give. Many US Universities are excellent are raising funds, so banks could adopt their model to regularlay solicit funding from their wealthiest clients for education and fighting poverty. - In English-speaking countries like India, getting girls in school and providing incentives for scientific education hopefully across all states through DIB education projects carry a lot of promise for positive outcomes. - In non-English speaking countries, huge efforts are sorely needed in my view to do BOTH : 1/ get the people to learn English and 2/ get the private sector to fund education and apprenticeships. In deep poverty areas, get girls in schools and fund learning English as mandatory second language to learn about business and growth. In our modern societies, attract more females in engineering schools by getting more women in management positions and on company Boards. And fund English as mandatory second language to learn about business and growth. In Southern European countries, fund learning English as mandatory second language to learn about business and growth. Those countries with the highest % of English speaking people appear to have higher GNP/capita, less unemployment. Spain, Italy with only 22% to 34% of the people speaking English have to work hard to reach Germany 56% and the Netherlands 90% of people able to hold a conversation in English! As an example, to resume with growth, one may wish to get Italy to speak English, get Italy bi-lingual, with everything translated into English as a natural routine. ( https://jakubmarian.com/wp-content/uploads/2014/05/english-eu.jpg ) Hopefully, all the banks, all insurance companies should be encouraged to step up worldwide and to follow UBS Optimus Foundation great example.
Italiano (???? Proud )al estero da 10959 gg. Director of Bazooka Ice Hockey Technology Inc. Voglio La Pace è Non La Guerra. Italiano al estero con strategie innovative nella disciplina del Fitness. ?? la Liguria,
10 年The middle class has given "all" that it can give and now it's depleted in helping the poor. Bad management has stifled economic growth to the lowest values ever seen in industrial times.
Director: Sgomba Solution (Pty) Limited
10 年Sergio, It is amazing to learn that in the world out there, there are big companies like UBS that honestly sees the need of assisting the poorest of the poor. One hope and pray that more and more big companies can join hands in this wonderful venture. As a Black man in Africa, I really know and understand clearly, what poverty is. May God bless your company..
GoldD
10 年Imagine a good runner and a child to run a race; a good will runner soon relaxed and starting his investment on new the track and the child got tried and breath heavily because it is hard to pay his new invested track, soon his son will taker over and ran on the newly invested track and but failed to reach the final destination. If this kept on and on then we found the caused?