A Guide to Investing for Institutional Investors and Faith-Based Organizations (FBOs)

Climate change and poverty are two of the 21st century’s biggest challenges and they are inextricably linked. As the momentum rises to create a more environmentally and socially sustainable world, Institutional Investors face regulatory pushes towards more sustainable practices. At the same time stakeholders that have trusted their assets to their fiduciary managers, demand that their assets be invested in ways that benefit both people and planet. Similarly, faith communities call on faith-based organizations (FBOs) to manage their for-profit activities in ways that align with the values they preach and represent.

Despite the willingness of many investors to participate in this system change, there is often a lack of knowledge and understanding of the problems they wish to solve, available interventions, or uncertainty about how to utilize their assets to create meaningful change. To address this information gap, FIIND Impact Foundation has investigated effective and investable 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.

Inspired by the Oxford Poverty and Human Development Initiative’s (OPHI) Global Multidimensional Poverty Index, our guide takes a multidimensional approach to poverty, recognizing that it manifests not only as financial deprivation but also in aspects such as health, nutritional status, and access to essential services like clean water and sanitation and adequate, affordable housing for the people that are deprived. We have identified seven multidimensional poverty solution groups. They are all interconnected, especially the solution group clean energy for all, to the environmental objective of preserving the planet:?

1. The manifestation and extent of poverty differ across?geographic regions,?sometimes even within countries, requiring context-appropriate solutions.?
2. Reach of impact: Access to water, sanitation, and hygiene (WASH) offers significant and effective impact opportunities. With an estimated 6.2 billion people lacking access to safe drinking water or toilets. Similarly, the solution groups Healthy Lives and Clean Energy for All have a significant impact and target over 4 billion people. An enormously vast number of people that are currently lacking access to essential healthcare services or are living without electricity and clean cooking solutions.?
3. The most investable interventions?include those that increase access to clean energy, financial inclusion, and food productivity as they represent the largest universe of impact funds and products available to investors.?
4. Investing in?private equity funds?offers exposure to the greatest number of interventions, with significant opportunities also available through listed bonds and equities, private debt, infrastructure, and real estate.
5. The mismatch between need and investability for many of the interventions highlights the importance of?catalytic capital and the role of mission-driven organizations like faith-based organizations, development finance institutions, and non-profits. They are essential to building the market and paving the way for other institutional investors to enter the scene.
6. Climate change and poverty are inextricably linked,?it is a threat, and 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.

Our publication provides valuable guidance to institutional investors (including FBOs) looking to contribute to help solving climate change and eradicate multidimensional poverty through their investment portfolios. It answers critical 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?”?

To emphasize the urgency for a more environmentally and socially conscientious economic and financial system, we end with a quote by former UN Secretary General Ban-Ki-Moon:

“We are the first generation that can end poverty, the last that can end climate change.”?

We invite you to download the full research publication here and learn how your investment portfolio can contribute to help solving multidimensional poverty.

The following tables present a summary of the conclusion per solution group. It shows the effective and investable interventions and highlights (in the last column) the link with climate mitigation.

We are looking forward to receiving your feedback and comments. We are more than happy to present and / or share a voice over on the multidimensional poverty research in your organization and or at eligible events

Best regards,?

Dr. Sophie Robé, CFA and Maarten Toussaint, co-founders of the FIIND Impact Foundation

Click here to download our publication.