1. Job creation
Swedfund endeavours to contribute to inclusive growth by creating more decent jobs in our investments. A job gives people their own disposable income and thereby empowers them. By creating more jobs, we also minimise the risk of child labour, because working parents create more opportunities for their children to attend school.
According to the World Bank, which interviewed 60,000 people living in extreme poverty, work is by far the most important factor for them in their efforts to improve their living conditions./1/
Six hundred million jobs will be needed by 2030 in the developing countries./2/ We can see that many young people are going to university and that more and more people are connected to the internet, but large groups of people still have no job. A frequently used term is “jobless growth", which is a situation where although overall production in a country is rising, the employment rate remains stationary.
To create more jobs, we therefore need to transform jobs in the informal sector into jobs with good employment conditions in the formal sector. A decent job is characterised by good employment conditions, such as regulated working hours, a safe environment and a right to leave and a reasonable salary.
Creating decent jobs to help people escape poverty and improve their standard of living lies at the heart of Swedfund’s mission.
2. Climate change
Climate change is affecting us all here and now, and must be addressed. The UN climate summit in Katowice confirmed this, as did the report by the UN climate panel which was published in September 2018.
The average global temperature is rising steadily as a consequence of increasing concentrations of greenhouse gases in the atmosphere. Sea levels are rising, glaciers are melting and the frequency of natural disasters and extreme weather events is continuing to increase. Moreover, the challenges will only become greater as the population of many poor countries continues to increase. More and more people will need to co-exist on the already depleted natural resources of the Earth.
The world’s poor are most affected. Not only do they often live in vulnerable areas, they also have little or no resources to adapt to or recover from extreme weather and natural disasters. As the effects of climate change worsen, the opportunities to escape from poverty are decreasing. Swedfund’s mission, to fight poverty by investing in sustainable businesses, is more relevant today than ever before, including from a climate perspective.
Our renewable energy portfolio has increased five-fold since 2015. In 2018, we prepared a climate report which analyses the environmental and climate-related risks that impact on Swedfund’s portfolio and the way in which we operate in order to minimise these risks. We have adopted a structured approach to environmental issues in all our holdings.
3. Empowering women
In order to boost growth in a country, both men and women need to be in employment and when management teams also are gender-balanced, productivity is improved and companies become more viable over time./3/ An important aspect of Swedfund’s efforts is to develop companies as regards working conditions, e.g. working hours, remuneration, health and safety. When a woman earns money, there are also social consequences, because research suggests that women spend 90% of their wages on their family in the form of food, medicines and schooling for the children./4/ This has positive effects for the woman's children, since the daughter of a working woman is more likely to go on to higher education than that of a woman who is not in employment, while the son of a working woman is more likely to help out at home with chores that were previously considered to be the preserve of women.
Swedfund is implementing our Women4Growth programme to encourage companies that we invest in, to unleash the full potential of their female employees.
Another way to increase growth is to free up time for women and girls. The term “time poor”' is used in this context. This term refers to the hours that women and girls in the poorest countries spend collecting firewood and water. Investments in water and energy help to free up time for people to go to work, attend school or do other things. There are many examples where an investment in energy, for example, has positive effects on gender equality and growth.
When Swedfund carries out an investment, we must generate a return within our three pillars: impact on society, sustainability and financial viability. At the same time, we are willing to take on far greater risk than private investors – it is a vital part of being not only additional, but also catalytic. Development finance institutions also invest under market conditions so as not to disrupt the market and in order to contribute to long-term sustainable private sector development.
The ability to use blending instead is something which has grown in importance globally. In somewhat simplistic terms, blending involves mixing aid with private financing in order to reduce the financial risk that private investors have to take on. This can lead to a higher degree of investment by private investors. Blending can therefore be a vital instrument in the mobilising of capital to implement Agenda 2030. Development finance institutions such as Swedfund can act as a bridge between traditional aid and private investors.
The danger of blending is that you must be careful not to disrupt the market or create artificial developments in the private sector, which could lead to the emergence of dependencies that are unsustainable in the long term. The outcome may be that private investors choose not to invest, i.e. instead of mobilising private capital for Agenda 2030, private operators opt to withdraw their investment because the rate of return is too low. Blending should therefore be used carefully and with caution. Twenty three DFIs and multilateral development banks have jointly developed a set of guidelines, which emphasise the importance of having a clear exit strategy, minimising the use of blending and ensuring that blending is primarily used to mobilise private capital for developing countries.
1) Voices of the Poor, The World Bank and Oxford University Press. Study conducted during the 1990s and summarised in a report published in 2002
2) Implementering av Agenda 2030 i Sverige och globalt. Sammanfattande rapport" The analysis group Global samverkan. https://www.regeringen.se/contentassets/378ec34646ca46e7be9901f9794378ec/slutrapport-implementering-av-agenda-2030-i-sverige-och-globalt.pdf
3) Boston University. Are Women the Key to Sustainable Development? Sustainable Development Insights. 2010, page 7
4) https://www.globalcitizen.org 10 reasons why investing in women and girls is so vital (2014). Downloaded 20 February 2018