What’s concerning investors – Part 1: UN SDG 10 – Reduced Inequality

In the next series of articles, we are going to concentrate on major issues that companies can positively impact. The United Nations Sustainability Goals “UN SDGs” provide the Framework that Giddy Up has adopted to assist companies meet their Social License to Operate.

Impact Hub report – major program areas

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Reducing inequality is a high scoring development goal adopted in all regions outside Africa. Despite political rhetoric to the contrary, none more so than in the United States (and Canada).

Goal 10: Reduce Inequality within and among countries

The UN records that “international community has made significant strides towards lifting people out of poverty.  The most vulnerable nations – the least developed countries, the landlocked developing countries and the small island developing states – continue to make inroads into poverty reduction. 

However, inequality persists and large disparities remain regarding access to health and education services and other assets”.

The UN has a global outlook, but many of the measures (identified in bullet point below) that it adopts to test progress by 2030 also have domestic application.

  • By 2030, progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average

  • By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status

  • Ensure equal opportunity and reduce inequalities of outcome, including by eliminating discriminatory laws, policies and practices and promoting appropriate legislation, policies and action in this regard

  • Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality

  • Support for addressing inequality is coming from across the Community. The consequence of dereliction of reducing inequality are more fully explored in the next section.

 

Concern about income inequality
Institutional investors are increasingly realising that income inequality—the gap in income and wealth between the very affluent and the rest of society—has become one of the most noteworthy socioeconomic issues of our time. 

It has the potential to negatively impact institutional investors’ portfolios as a whole; increase financial and social system level instability, damage output and reduce economic growth, and contribute to the rise of populism, extremism, isolationism and protectionism.1

The effects for investors of a massive income gap are potentially three-fold. It can:

  • Negatively impact long-term investment performance;

  • Change the risks and opportunities that affect the universe of investment opportunities;

  • Destabilise the financial and social systems within which investors operate.

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Engage to improve
Exclusion of companies from Fund Indexes and Portfolios is one, but not the only answer. Inclusion allows the opportunity for dialogue and a considered and sustainable pathway to lock in change.

NZ Fund Manager Harbour Asset Management Beliefs include “ESG monitoring and assessment is constantly evolving. Harbour believes in engagement on ESG matters rather than divestment”2

 

Conclusion
NZ and Australia have been slow to adopt ESG measures when compared to Europe and North America. The upside of this is that pathways exist. It would therefore be churlish for us not to act before the tide washes in and erases the guiding footprints in the sand.

 

References

1.       https://www.unpri.org/academic-research/why-and-how-investors-can-respond-to-income-inequality-/3777.article

2.       https://www.harbourasset.co.nz/assets/Uploads/39843368d0/Harbour-ESG-Policy-Update-2018.pdf

InsightsBrian Steele