They make up more than half of the world's extreme poor and more than two-fifths of the displaced. And as tomorrow's adults, they are all that future. But few people consider their children when building their investment portfolios, or how their investments will impact them. However, this may be changing with the advent of a new investment strategy: children's lens investing.
This approach is holistic. For example, consider pay-as-you-go solar services for rural and low-income areas in developing countries. Providing affordable lighting allows schoolchildren to study at night and improves academic performance. But it also benefits the whole family as a healthier and safer alternative to kerosene lamps and a power source for charging mobile phones, essential for mobile banking and other digital services.
But until now, few investors have taken this approach, says Christina Shapiro, president of the Impact Fund for Children, the investment arm of UNICEF US. Last year, we published the Childens Investing Framework and Toolkit, which includes due diligence questions and impact measurement principles, to help asset owners and portfolio managers put childlens investing into practice. She says the concept is not new. “But it's a very fragmented and unorganized field.”
Companies' poor track record on child advocacy also makes it difficult for investors to build child-friendly portfolios from publicly traded stocks. In its latest report, the Swedish non-profit Global Child Forum assesses the impact on children's rights of a wide range of companies across 28 sectors worldwide (with a total revenue of $32.6 trillion), comparing them to 2021. It was revealed that the standards for 2023 have been lowered.
The Global Child Forum found that while 87% of companies have a child labor policy aimed at preventing exploitation, only 49% use audits and supplier assessments to verify implementation. revealed something. Only 30% reported child labor incidents or risks. And 131 of the 795 companies surveyed in the report did not even consider the impact on children in the workplace, market, environment or community to be important to their business.
While this is concerning, the fact that investors rarely consider children as a key component of their investment strategy is not surprising, suggests Shapiro. “Children are not economic agents,” she points out. “They're not making decisions about rental or consumption. But they're being affected by all those decisions.”
Many wealthy individuals and social and environmental impact investors are currently funding mission-driven social enterprises, nonprofits, and foundations that provide learning, nutrition, health care, and other services to children. is.
But few people consider themselves investors in children's lenses. “It's typically expressed in health care and education, but not in related areas like renewable energy and affordable housing,” said Jennifer Price, president and CEO of nonprofit investment firm Calvert Impact Capital. “No,” he says.
UNICEF USA's framework and toolkit will help change this and improve the lives of today's children and their chances of growing up to be workers, consumers, voters, and leaders. We hope that more private funding will be available. “Philanthropy remains important and is the right solution to reach the most vulnerable,” Shapiro said. “But investment capital also needs to flow in.”
So, could inventing a new investment terminology and publishing a framework shift enough investment capital in this direction?
History suggests that this is possible. After all, it has been more than a decade since the term gender-lens investing first appeared, and it has become the standard used in institutional investments totaling $868 billion, according to the U.S. Sustainable Investment Forum.
Although children's investing is still in its infancy, asset managers and impact investors are beginning to explore or adopt the principles. For example, Calvert Impact Capital, as well as individual investors and wealth managers, have integrated this approach as part of their investment strategies.
“We like the UNICEF framework because it forces us to think about investing from a child's perspective,” said Kevin Teng, chief executive officer of Wise Wealth Management Singapore. “We have not changed our investment policy at this time,” he added. “But it certainly got us thinking.”
A key element of children's lens investing includes risk mitigation. This strategy, well-known among ESG (environmental, social, and governance) investors, involves holdings in a portfolio of companies that, for example, sell alcohol to children or use child labor in their supply chains. Due diligence work will be required to ensure that this is not the case.
“This is a lesson for all of us in the impact investing community to learn from,” says Amy Nelson, chief strategy officer at Rethink Capital Partners. The company is investing in children's lenses through Rethink Education, a venture capital fund focused on early-stage education technology companies. Investors include family offices, foundations, endowments, and high net worth individuals.
Nelson said the child-focused approach has enabled the company to conduct a vetting process to determine whether the company's code of conduct and marketing policies include child-related clauses and whether there are mechanisms in place to address any negative impacts. He said he started adding questions. The strategy affected children.
Children's lens investing also focuses on investments that have a positive impact on children's lives. But unlike traditional investments in infant health or early childhood education, for example, this approach takes into account everything that can affect their well-being.
“Children don't live in silos,” Price says. “Children have access to education, but without a home, they cannot grow up to be productive citizens.”
Connecting the dots in this way means individuals who invest in children's health and well-being have the potential to have an even bigger and more far-reaching impact with their money David O'Leary, founder of Kind Wealth, a Canadian family office that is a wealthy family. “It intersects with gender equality and even climate,” he argues. “The more we can think about children in the investment environment, the more we can lead to improvements in other areas.”
Impact investor Jeffrey Bykowitz agrees. His focus is child malnutrition. His personal foundation is connected to a social enterprise called Mother Food International, which he founded, along with other wealthy entrepreneurs, to help women in developing countries make and sell nutritious food. We are investing in
Mr. Bykowitz believes that given the scale of the hunger crisis, which leads to the deaths of more than 3 million children under the age of five each year, new forms of capital and how to deploy it are needed. “This problem is so huge and happens to have the highest social return on investment that we need to build a sustainable, integrated system to change the pattern,” he explains.
For some, applying a child's perspective to investing can bring new focus to an existing portfolio. This is the case with Sobrato Capital, the investment arm of California-based family-owned Sobrato Organization. The company also has a real estate division and a philanthropic division.
Victoria Fram, managing director of impact investing at Sobrato Capital, said that affordable housing, with play areas and safe spaces for children, or that could have a disproportionate impact on children, It cites climate change investments that tackle certain types of air pollution. “There are a lot of investments in our portfolio that we could call child investments, even if we didn't explicitly use that term,” she says.
In fact, investing in children's lenses does not mean reinventing the wheel. For example, one of the strategies proposed in the UNICEF framework is to use existing standards and metrics developed for other forms of sustainable investment. “Once you apply this tool, you don't necessarily have to innovate your existing practices,” Frum points out.
This was an important consideration for UNICEF USA when developing the framework. “We wanted to make sure this was built in a way that a fund manager could use and work within his existing impact investing and ESG criteria,” Shapiro says.
Public equity investors can refer to the Global Child Forum's annual benchmarks to assess the positive or negative impact that a company's commercial activities are having on children, as well as Impact investors have a wide range of existing tools available to them.
These include the Global Impact Investing Network's IRIS+ (Impact Reporting and Investment Standards), the United Nations Principles for Responsible Investment, and operational principles for impact management developed by the International Finance Corporation, the investment arm of the World Bank.
Nevertheless, some are concerned about the risk that investing in children's lenses could be seen as profiting from children. Calvert's Price says this is why it's important that “benefits” are measured in terms of their benefits to the health and well-being of future generations. “Children are not something we make money from. They are something we need to build a healthy future,” she emphasizes.
That's why children should be able to contribute to conversations about sustainable development, says Netherlands-based impact investor Edward de Jager. De Jaeger, a venture capitalist and impact investor, founded We Share Forward, a nonprofit foundation that describes itself as a “revolving fund for impact.” Pursues venture philanthropy and impact investing to advance early childhood education.
“We need to include them in the discussion,” De Jager says. “Rather than imposing solutions, why not invite younger children to discuss ideas that will shape the future in a playful way?”
Another change needed before investing in children's lenses can begin to drive positive change is how you view your investment schedule. “The structural problems of capitalism and markets work against what is good for children,” Price said. “We have to invest in them to build a healthy society in the long term, and the market doesn't think that way.”
But some hope that investing in children's lenses itself could be a catalyst for change. “If you focus on how future-oriented you need to be in your investments, your decisions will be made differently,” Frum says. “The children's lens framework is one way he can do that.”
This article is part of FT Wealthphilanthropy, entrepreneurs, family offices, alternative and impact investing.
