Traditional approaches to assessing poverty tend to focus on monetary methods, most notably the World Bank's International Poverty Line (IPL) of $1.9 a day.
Surprisingly, almost one in ten inhabitants of the planet still lives below that amount.
Although poverty inevitably encompasses economic elements, it is also related to social factors, such as lack of access to education;
health factors, such as hunger or malnutrition;
and with physical elements, such as access to electricity, clean fuels for cooking, water and sanitation and, of course, adequate housing.
In addition, it encompasses cultural aspects such as inequality, social discrimination and exclusion, and even political elements,
as the lack of participation in decision-making processes.
It is inextricably linked to the lack or absence of fundamental human rights.
So how can we capture these more granular elements of deprivation, as a way of trying to understand, address and eradicate poverty?
A multidimensional poverty index (MPI), such as that developed by the Oxford Poverty and Human Development Initiative (OPHI) and the United Nations Development Program (UNDP), can indicate the extent to which a person it is poor, and has been adopted in official measurements by the UNDP, the World Bank and more than 30 countries.
This multidimensional approach is examined in a new report (
Citi GPS:
Ending Poverty
) published jointly by researchers at Global Insights and data scientists at Citi, one of the world's largest investment banks, in collaboration with the Oxford SOPHIA team. (a not-for-profit partner of OPHI) to help bring this outstanding methodology more widely to the world of business and finance.
Examining this granularity makes for sobering reading and highlights a much deeper and more widespread problem than monetary measures alone suggest, such as the 2.65 billion people around the world who do not have access to clean cooking fuels. , or the 2,000 million who lack access to basic sanitation.
Eradicating poverty can boost economic growth, create a better workforce and increase the purchasing power of consumers
The benefits for the public sector are obvious: it allows policy makers to identify the underlying causes of poverty and develop targeted programs accordingly.
But beyond the obvious moral arguments, why should it matter to the business and financial community?
Well, quite simply, the eradication of poverty can significantly boost economic growth, it can lead to a larger, better educated, healthier and more committed workforce, as well as increase the purchasing power of consumers, generating entirely new sources of customers and demand: a virtuous circle, both socially and economically.
Although companies in developed markets believe that they are not directly affected by poverty, the reality is that they all are,
These questions are also becoming more relevant to investors, given the growing desire for their investments to have a social and environmental impact as part of the increase in ESG investment.
The assets under management of signatories to the UN-backed Principles for Responsible Investment now number more than $100 trillion, and investors are increasingly embracing the UN Sustainable Development Goals (SDGs) and aligning their strategies of investment to the 17 goals, the first of which is, of course: to eradicate poverty.
The capital is not only there, and willing to invest responsibly, but also wants to demonstrate how to invest sustainably, another area where MPI metrics could be a game changer.
The task of the financial community is to mobilize this capital, creating the appropriate investment vehicles that allow this capital to flow, since its lack is largely the reason for the current stagnation.
Blended finance, combining different sources of capital with different risk appetites, offers enormous potential, as do innovative new financial instruments such as social, sustainability and KPI-linked bonds.
In the latter case (where the achievement of a key performance indicator, which is what KPI stands for, can effectively turn the coupon into a bond), an MPI could help identify the most important KPIs for a program. eradication of poverty and could originate and direct that capital to the most effective investment areas.
But it's not just about the carrot of opportunity;
there is also a stick, as over time it may become more difficult, more expensive, or ultimately impossible to provide capital to, or invest in, companies, states, when efforts are not made to improve social and economic factors. Eradicate poverty.
The report identifies an aggregate investment opportunity related to MPI items of $1.6 trillion per year.
However, we must not fall into the trap of considering the fight against poverty as a cost;
At the macroeconomic level, investments aimed at fighting poverty can have dramatic effects on economic growth through their significant multiplier effects, between two and seven times.
To conclude, poverty is not a niche, isolated, or specific problem.
It's everywhere, it takes many forms, and it continues to ruin too many lives.
How many times have we been faced with a trillion-dollar investment opportunity, with the money prepared, with attractive returns and multiplier effects on offer, that can achieve immeasurable benefits for society and drastically improve the quality of life of billions of people? people all over the world?
The fight against poverty represents precisely that opportunity.
We have a moral obligation to accept that challenge and build a better and more inclusive future where no one is left behind.
Jason Channell
is responsible for sustainable finance at Citi Global Insights.
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