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By James Gifford, Senior Impact Investing Strategist at UBS Wealth Management, and Nicole Neghaiwi, Impact Investing Strategist at UBS Wealth Management
At the World Economic Forum in Davos in January, UBS launched a white paper that set out a blueprint for channeling private wealth into the United Nations' Sustainable Development Goals (SDGs). It argued that private capital is likely to be particularly important in achieving the goals of: zero hunger; quality education; good health and well-being; affordable and clean energy; sustainable industry, innovation, and infrastructure; and climate action.
While there is significant interest in the SDGs from investors, there is little understanding of exactly how to invest in these themes in ways that can generate real impact. While investment in listed companies that contribute to the SDGs is relatively straightforward, investment in private markets is more challenging. Here are three of the more investable themes connected to addressing the SDGs.
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Agriculture & food impact investments by asset class
Goal 2 of the UN SDGs seeks to "End hunger, achieve food security and improved nutrition and promote sustainable agriculture". Investing in businesses whose products and services enhance agricultural yields in emerging and developing countries holds enormous potential to drive improvements in human development and economic growth. According to a 2008 World Bank Agriculture for Development Policy Brief, agricultural growth in low-income and agrarian economies is at least twice as effective as growth in other sectors in reducing hunger and poverty.
Investment strategies include funds and direct investments focused on improving farming practices, irrigation and efficient water use, sustainable fertilizers, distribution channels, financing of seeds and other inputs, trade finance and agricultural technologies.
Emerging market healthcare
Healthcare impact investments by asset class
Goal 3 of the SDGs seeks to "ensure health and well-being for all, at every stage of life." Public financing in developing countries, while increasing, faces limitations and significant private investment will be required to accomplish this goal and its specific targets by the year 2030.
Every year, some 100 million people fall below the poverty line as a result of out-of-pocket expenditures on health. Investments in pharmaceutical companies and retailers that are improving access to generic drugs for base-of-pyramid (BOP) communities could help reduce household expenditure on healthcare, thus alleviating a key driver of poverty.
Other strategies include investing in "last-mile retailers", private clinics, ambulance services and training providers in low income and rural communities. There are also opportunities in information and communication technology (ICT) solutions for the health sector.
Education impact investments by asset class
Finally, Goal 4 of the SDGs calls for ensuring “inclusive and equitable quality education” and “lifelong learning opportunities” for all. Through investing in private sector businesses to increase the reach and quality of education, particularly in developing and emerging countries, impact investors can help drive innovation and need for capital in the sector.
Strategies include investing in microfinance institutions, which offer credit to low-income families for schooling, online education platforms and other ed-tech solutions and private school networks that function in areas where public systems are lacking.
Mobilizing private wealth for public good
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