On Principles of Responsible Investment

Q & A with Emilie Goodall, Head of Environmental and Social Themed Investment, UN-supported Principles for Responsible Investment (PRI)

Growth in PRI signatories and related AUM. Source: PRI

 

Thanks for speaking to us Emilie, but first things first, we hear the term a lot, but what does “Responsible Investment” mean?

Thanks for the opportunity and the questions! Responsible investment is an approach to investment that explicitly acknowledges the relevance to the investor of environmental, social and governance (ESG) factors. Responsible investors recognise that the generation of long-term sustainable returns is dependent on stable, well-functioning and well governed social, environmental and economic systems. We have a handy two page summary for those who want to know more.

That sounds great – so what is the PRI and how does it work?

The PRI Initiative is an international network of investors working together to put the six Principles for Responsible Investment (PRI) into practice. The goal is to understand the implications of sustainability for investors and support signatories to incorporate these issues into their investment decision making and ownership practices. There are now nearly 1200 asset owners, investment managers and service providers signed up from around the world, managing over US$ 30 trillion. The PRI Initiative helps investors to learn about and collaborate on the financial and investment implications of environmental, social and corporate governance issues.

Could you give us an example of how the PRI has led to more responsible investment?

Let me give you a couple! In terms of tackling specific problems in the investment chain, the PRI runs a collaborative engagement platform called the Clearinghouse. It provides signatories with a private forum where they can pool resources and share information when engaging with companies and policy makers on ESG issues. Collaboration carries extra weight and can be less resource intensive than if investors engaged alone. One recent engagement brought together 21 investors concerned with poor public disclosure of anti-corruption risk management among 21 companies. After three years of engagement, sixteen companies have improved their performance against a set of indicators provided by Transparency International, with ten companies improving their score by four-fold and the leading company improving its score by six-fold.

Microinsurance: Missing Piece of the Financial Inclusion Puzzle

There are over one billion people worldwide seeking, and frustrated by the lack of, financial services to help them rise to the middle class. Although microcredit and microsavings have been holding the limelight as financial tools to help the poor, LeapFrog, a leading impact investment fund, argues that it’s time for microinsurance to join the stage.

 In a small dinner with the London based Women Advancing Microfinance UK network, Niclas Thelander the global head of Leapfrog Labs explained why microinsurance has the power to change lives worldwide. Leapfrog labs is the sister non profit grant making organisation of Leapfrog Investments, a profit with purpose emerging markets private equity fund that has reached 15 million people since inception in 2007. The two entities work together to invest and enable game changers to improve the lives of low income populations and have garnered the support of leading impact investors, entrepreneurs and global financial institutions. Their backers read as a who’s who list of development innovation and financial clout: Pierre Omidyar, George Sorros, the IFC, JP Morgan, Triodos, Calvert Investments, to name a few.

The tool for change that Leapfrog focuses on is microinsurance. For the global population living at “the bottom of the pyramid” (BOP) – the world’s poorest citizens forming an invisible and largely unserved segment – a lack of access to financial services has been a long acknowledged problem. Crudely defined as those living on between $2-2.50 a day on average, they're a major part of the 50% of the global population who do not have a bank account and usually live in developing countries with weak institutions and infrastructure.

However, even in these BOP societies, a lack of access to savings and credit is not necessarily the reason why people stay locked in cycles in poverty; but the lack of buffer which makes them vulnerable to life’s financial shocks. Leapfrog argues that insurance for the poorest and most vulnerable, is a sorely lacking financial tool preventing low income citizens from improving their living standards. The poor can save, but just one adverse scenario could wipe out their savings and mire them into debt rendering their savings efforts futile. Leapfrog also found that microinsurance fosters positive behavioural change: for example, a mother with health insurance may choose to send her child to school instead of encouraging him or her to work to earn money to save.

 

Image courtesy of Flickr creative commons

Microinsurance is an instrument to protect the financially excluded against risk; as a concept it is the same as regular insurance but it focuses on low income people. Usually microinsurance offers protection against common risks, such as accident, illness, death and natural disasters: shocks that disrupt any individual’s life, but can prove to be devastating with lasting generational effects for the poor. The pricing of microinsurance premiums must also be tailored to the needs, income, cash flow and level of risk of the individuals. The product must strike a delicate balance between providing protection, ensuring sustainability for the insurer and not financially overburdening clients.

Small Farmers, Big Opportunity

How can we feed the growing world? By empowering one small scale farmer at a time.

Bean Farmer in Sri Lanka. Image courtesy of UN WomenWatch

The global population, having ballooned over the last century, is likely to reach 7.5 billion people within the next decade. How are we to feed everyone? 

Large multinational food companies have been thinking about securing their food supply for some time and have put a lot of energy and advancement in improving the productivity of their usual suppliers: big plantations and farms. But as these corporations look ahead to a swelling consumer base from a growing global middle class coupled with increasingly fragile food stock as climate change threatens crops, they are forced to focus beyond large farms and co-ops to make sure that their food supply grows apace with demand. 

Increasingly, they are considering ways to include small scale farmers into their supply chains - those previously excluded from the global food industry and often some of the poorest and most marginalized. A recent report, Catalyzing Smallholder Agricultural Finance, by the development consultancy, Dalberg, found that this sector is no small fry: there are an estimated 450 million small holder farmers in the world - that’s more than the US and Japanese populations combined. With this new focus, it might finally be the big time for the small farmer. 

By 2018,  Dalberg, predicts that food consumption worldwide is expected to increase by nearly 30% compared to 2005. Our eating habits aren’t also just preoccupied with the amount of food available; many of us, especially in developed countries, expect a stable food supply and prices. We’re accustomed to having strawberries all year round for roughly the same cost, not to mention coffee - perhaps our most popular global addiction? If we don’t work harder at improving global food production, the stability of our food system is under threat. Factors such as climate change, population growth, and an expanding global middle class -- as many emerging countries are getting richer -- are placing increasing strains on the world’s food supply. 

Those with a sweet tooth might be horrified to learn that if cocoa consumption continues to grow at its current pace, then we’re on track to see a large cocoa deficit of one million tonne by 2020 if we don’t expand our production. A secure and sustainable crop is no longer a luxury for a business, instead smart companies are waking up to the significant food challenge ahead and realize it is a core business threat. Five of the top international chocolate manufacturers -- Kraft, Mars, Nestlé, Ferrero and Hershey’s -- have made public commitments to sustainable cocoa. Unilever, a major innovator and business leader in sustainable supply chains, has pledged to sustainably source 100% of its tea by 2015 -- and their tea production amounts to 12% of the world’s black tea supply. This change in corporate direction  for sustainable and inclusive production can have huge implications for our global development.

With so many demands upon food production, and large farms operating at near maximum capacity, the spotlight is now cast upon the small farmer. The small scale farmer is usually defined as having less than two hectares in land and often plighted with a high vulnerability to weather due to old farming technology and outmoded practices resulting in low yields and low quality crops. Adding to their troubles, small scale farmers often lack market access as they work in remote areas, therefore forced to rely on middle men to collect their goods to take to market giving them little control or awareness over how much they can sell their crops for, keeping them mired in poverty and unable to develop their business.  

Microfinance -- the practice of providing financial services, such as savings and small loans, to those excluded from the formal financial system -- could have a  major role to play in unlocking the potential of these marginalized small scale farmers. With an appropriate loan designed for the  farmer’s needs, such as working with harvesting seasonality, small scale farmers can upgrade their tools, buy more resilient seeds, and generally have access to capital to help improve their crop. 

Cervical Cancer Awareness

Cervical cancer is the second biggest cancer killer of women worldwide.  We know that nearly all cases of cervical cancer is caused by the human papillomavirus (HPV).  There are many types of HPV but we know that HPV types 16 and 18 are the most cancer causing.  That’s why there is a vaccine targeted to those two types.  There are many ways we can prevent cervical cancer.  For younger girls who have not yet had sex, the vaccine provides good protection against the cancer causing viruses.  For other women, regular screening at their doctor is important.  Screening means your health professional will take a Pap smear.  To do this, a cotton swab is used to gently take some cells from your cervix, no scraping is involved and it should not hurt. For other women, though more rare, they might have an HPV infection but it can just clear up on its own.  But all women should get a regular screening to make sure they are healthy.

Yet given all the things we can do to prevent cervical cancer, why do so many women die of cervical cancer? The answer is, it depends on where you live. In developed countries, which includes North America, Europe, and Australia, the risk of you getting of cervical cancer is only about 5%.  This is because there is regular screening to catch women who are at risk of developing it.  When they are screened, if there are any abnormalities the health professional will treat to prevent progression to cervical cancer.  In low income countries like Kenya, this does not happen as there are not enough resources to screen women. Therefore, over 80% of new cases and deaths due to cervical cancer are in low income counties like Kenya.

Women in Kenya suffer because there is no infrastructure in place to implement regular Pap screening.  However, many health professionals have looked at cheaper and more feasible alternatives to Pap screening. In Kenya, Dr. Megan Huchko from UCSF has helped to implement a cheap diagnostic called visual inspection with acetic acid. At HIV treatment clinics such FACES, where Dr. Huchko works, women can be seen for reproductive health services. As part of a routine check-up, women who attend the clinic have their cervix ‘painted’ with acetic acid, or plain table vinegar. Any abnormal cells turn white. These abnormal cells mean that there is an increased risk of cervical cancer, so it is important that they are removed. Women are offered removal, either through “shaving off” or freezing of abnormal cells in the clinic. A few studies have shown that this is a feasible and cost-effective method of cervical screening for women in low-resource settings.

Cervical cancer is a major risk to a woman’s health. High-income countries have procedures in place to screen women for this risk. Yet most women who live in low-income countries do not have these screenings, which leaves them more likely to die of cervical cancer.  Overall, it is important that we think about feasible solutions that can be used in low-income settings.

Follow me on twitter: @rubysinghrao.

Fashioning Women’s Development

Editor's Note: Lisa Wong is a traditional and impact investment professional at Nikko Asset Management and co-runs the UK Chapter of the international Women Advancing Microfinance (WAM) network based out of London. Her specialties include female empowerment, inclusive business, microfinance, and green investment. An avid writer and reader, she is currently working on a creative project on the intersection between the written word and visual culture in her spare time. She holds an English MA from the University of Cambridge and Dual Degree Master of Public Administration in Public Policy and Economics from the London School of Economics and Columbia University. 

Women and fashion have a longstanding and complex relationship: often a source of joy as well as contempt. Recently, in the sleek surroundings of a London Soho art gallery, Rook and Raven, two leading female sustainable fashion experts exposed some ugly truths about fashion, and the visionary efforts underway to revolutionize the industry as part of the Women Advancing Microfinance UK speaker series.

Dr. Pamela Ravasio, winner of UK “Green Oscar,” the Observer Ethical Award, and textile supply chain expert, ranked the fashion industry as the second worst in the world in environmental and social abuse – right after agriculture. Behind the basic white tee and the darling dress, there are often stories of child labour, chemical poisoning, slavery and textile waste – to name but a few ills. Most fashion savvy consumers and creators are not purposefully inflicting such terrors on the world, Ravasio argues, but in a veil of unknowing many are ignorantly or blindly allowing a network of harm to propagate in the service of style.

When one is confronted with a t-shirt; and 2.4 billion are produced a year; one often has no idea who made it and under what conditions. A traditional conception of fashion sees that impact is measured by aesthetics and functionality, which focuses on the design level. Often designers have never been in a cotton field or a dye factory – they have no concept of the wider impact of their design decisions, or any relation to the effects they are causing. A fashion supply and distribution chain is often so fragmented that the full story of an item of clothing, from how the crop was grown, the labour conditions in which it was made to how the waste products are disposed of are rarely fully known. The button may be from Taiwan, the cotton from China, the worker from Bangladesh – the assembly line is often global and multi-partied. Ravasio revealed that 25% of the world’s pesticides are used in relation to the fashion industry – how many fashion insiders and consumers even consider this factor when faced with a new item of clothing?