The world’s population has grown from about 7 billion to 7.7 billion over the past decade and is forecasted to hit 8.5 billion in 2030 and 9.7 billion in 2050.
Coinciding with this staggering growth is rapid urbanisation. While 2007 was the first year where more people lived in urban areas than in rural areas, about two thirds of the global population will be living in cities in 2050.
On this UN World Population Day, it is important to note the many challenges created by continual population expansion and urbanisation – including access to healthcare, education, employment and appropriate working conditions, and social justice. Many of these matters have been exacerbated by the ongoing Covid-19 pandemic.
Fortunately, the investment community is rising to the challenge, as we increasingly witness more and more dedicated strategies targeting businesses providing solutions to pressing social issues.
In attempting to address many of today’s sustainability challenges, we see compelling investment prospects within three major themes – vital needs, inclusion and empowerment.
See also: – Nordea to soft close climate fund
LEG (vital needs: affordable housing)
LEG is a pure play on the German affordable residential market, where there is a shortage of affordable housing and demand is higher than supply. LEG, which has a 10% share of the German affordable housing market, offers rents at a 30% discount to the average, with lower rent inflation. While the company is generating relatively low returns, it is a very stable business and offers an attractive risk/reward.
Safaricom (inclusion: digital connectivity)
The largest telecommunications provider in Kenya, Safaricom is one of the most profitable companies in the East and Central Africa region. Smartphones serve as the basic medium to connect to the internet for Kenyans, as just 12% of people have access to fixed broadband. In addition, less than 40% of the population have a bank account, but Safaricom’s mobile payment platform M-Pesa significantly expands financial inclusion by enabling transactions via this system.
Bank Rakyat (empowerment: financial engagement)
The second-largest bank in Indonesia, Bank Rakyat is one of the most successful microfinance institutions in the world. Many people in Indonesia do not have access to a bank account, so Bank Rakyat’s small loans are crucial in enabling families to establish and expand their own small businesses. Bank Rakyat can provide loans at reasonable rates, as its non-performing loan ratio is actually very small compared to traditional bank lending. This is positive for the company and investors, as well as society at large.
