When the G7 met in June, UK Prime Minister Boris Johnson called on world leaders to learn from the “mistakes” of the 2008 financial crisis and to ensure the post-pandemic recovery tackled the “scar” of inequality. Investors can play a major part.
Like many of the world’s larger economies the UK may be wealthy by some measures, but these headline statistics can hide large inequalities. The “levelling up” agenda set out by Boris Johnson for the UK – and echoed by policymakers in other G7 countries – is aimed at narrowing some of those divisions.
Social inequality is important to investors because, as with other ESG (environmental, social and governance) considerations, a failure to identify problems can add to risk.
Inequality has negative impacts on broader society and the economy. From an economic perspective, where groups are excluded or “left behind”, there is significant loss of GDP and human capital wealth.
From a societal perspective, exclusion can lead to instability and conflict as the prospects of rich and poor diverge. The pandemic has unfortunately exacerbated the gap between rich and poor and, like the health impacts, it is anticipated that the longer-term social and economic impacts will be felt by the most vulnerable.
We actively engage with companies to make sure they’re progressing inclusion and equality, not only at the company level but importantly also throughout their supply chains and distribution networks. The International Labour Organisation estimates there are up to 40 million people in forced labour and over 150 million in child labour around the world. This is an unacceptable face of capitalism, and the current crisis threatens to exacerbate the situation. We have engaged with a number of companies over concern about increased rates of modern slavery seen during the pandemic.
With record inflows into sustainable funds in 2020, investing for social impact is no longer a niche area.
In a bid to unite profit with purpose, we are actively allocating capital to companies and causes that support social inclusion. This includes access to finance and connectivity, education and the provision of housing for the homeless and other vulnerable groups.
We provide capital to charities and social enterprises working to improve the lives of disadvantaged groups in the UK (see Hull Women’s Network, below), for example, by investing in the Schroder Big Society Social Impact Trust.
Each year around two million people in the UK report experiences of domestic abuse. A key challenge is often access to appropriate housing.
Safe, high quality housing can be an important lifeline for women attempting escape, but it’s in short supply and often over-subscribed. Hull has one of the highest incidences of domestic violence in England. In 2018- 19, Hull Women’s Network (HWN) received over 650 applications for accommodation.
HWN purchases properties with financing from investors, which it repays with rental income from housing benefit. HWN offers specialist domestic abuse support, nursery provision, family law legal services, training and volunteering opportunities. Funding has meant the charity can buy an extra 49 homes for the long-term benefit of women and children. By buying homes to use as supported accommodation and “move-on” homes, the charity is able to support women for a longer period of time, helping them achieve greater stability. This has been proven to reduce the risk of women returning to the abusive environment they left.
The vital role of investors and financial markets in furthering sustainable development is recognised in the UN’s Sustainable Development Goals (SDGs).
The 17 SDGs were introduced in 2016, offering a global, multi-agency perspective on the prosperity of people, and the planet. The SDGs are often described as “the best thing the world has to a strategy”.
The goals themselves can be categorised into two key areas – social and environmental. Some of the social goals aim to meet basic needs. For example, ending extreme poverty and hunger, or ensuring universal access to healthcare, clean water and sanitation.
Other goals advance human rights, empowering people through quality education, decent work and by reducing inequalities. The wide-ranging environmental goals aim to keep the world within key planetary safety boundaries through changing how the economy works. They cover climate change, access to affordable and clean energy, sustainable consumption and production, and biodiversity on land and below water.
The SDGs provide a robust road map for investment opportunities over the next decade. The 17 UN Sustainable Development Goals are organised around 169 sub-targets. They form an important part of our impact analysis, helping us understand how our investments are positively or negatively aligned to these targets.
SDG 10 – Reduced inequalities: Financial and digital inclusion
Poverty and inequality can have a significant negative impact on all areas of a person’s life, including how long they live. Regional variations are stark. Investing to reduce these inequalities and improve the lives of the poorest and most disadvantaged people in the UK was a key driver for our recent collaboration with our parent Schroders and Big Society Capital, the UK’s largest social investor. We are investing in a number of key areas that support social inclusion by providing finance to social enterprises, charities and mission-led businesses to enable them to scale their operations and positively impact more people.
The securities referred to in this article are for illustrative purposes and are not to be considered a recommendation to buy or sell.
The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.