Invest in UN SDG Goal 1: No Poverty with ESG ETFs

Poverty, social inequality and climate change are a few examples of some issues we are facing today on a global scale. Rising consciousness towards these problems has enticed nations and organizations to enact initiatives with the goal of improving quality of life around the world. Investors also have ways to create positive impact, and this can be done through various investing channels. In this article we highlight how you can contribute to UN SDG Goal 1: No Poverty with ESG Exchange-Traded Funds (ETFs).

17 SDGs for a better future

The Sustainable Development Goals (SDGs) are 17 targets set by the United Nations in 2015 as a global initiative to tackle issues that affect humans and the environment we live in, with the hope of achieving tremendous progress by 2030.

The 17 sustainable development goals (SDGs) to transform our world:

1. No Poverty
2. Zero Hunger
3. Good Health and Well-being
4. Quality Education
5. Gender Equality
6. Clean Water and Sanitation
7. Affordable and Clean Energy
8. Decent Work
9. Industry, Innovation & Infrastructure
10. Reduced Inequality
11. Sustainable Cities and Communities
12. Responsible Consumption and Production
13. Climate Action
14. Life Below Water
15. Life on Land
16. Peace, justice and strong institutions
17. Partnerships to achieve the goals

Each goal has several targets and is measured quantitatively by indicators provided by private and public entities. The creativity, knowhow, technology, and financial resources from all stakeholders are necessary to achieve the SDGs in every context. The beauty of these goals is their interrelation, meaning that action in one area will affect outcomes in others. The development of those goals must balance social, economic and environmental sustainability.

UN SDG GOAL #1: Eradicating Poverty

Eradicating poverty is without a doubt one of the hardest goals to tick off the list and sadly can't be solved by a money printing fiesta and zeppelin drop-offs (A "La Casa de Papel").

Today, more than 10% of the world population still lives in extreme poverty, struggling to make ends.

Reasons for poverty are many, but are mostly related to:

• History: Legacy of a troubled history involving conquest which prevented many people from accessing land, capital, education, and other resources that allow people to support themselves adequately. (e.g. most African colonies)
• War & political instability:  Wars and political instability disrupt economic prosperity and growth (e.g. Yemen, Syria)
• Poor economic management: Corruption and bad monetary decisions can lead to severe consequences such as bankruptcy, inflation and devaluation (e.g. Lebanon, Argentina)
• Discrimination and social inequality:  Inequalities in income distribution and access to productive resources, basic social services, opportunities, markets, and information have been on the rise worldwide, often causing and exacerbating poverty (e.g Ukraine, Slovakia)
• Vulnerability to natural disasters: Earthquakes, floods and droughts can be very damaging for weaker countries (e.g Haiti earthquakes, droughts in Horn of Africa and floods in Bangladesh)
• Black Swan Event: The Covid-19 pandemic had devastating social and economic consequences on world economies, especially on poorer nations (lockdowns, layoffs and lack of social security and health insurance)

Since its release in 2015, the first of United Nation’s goals aims to “End poverty in all its forms everywhere”. Its seven associated targets aim to:

1. Fight extreme global poverty, reduce at least by half the proportion of men, women and children of all ages living in poverty
2. Implement nationally appropriate social protection systems and measures for all
3. Achieve substantial coverage of poor and vulnerable populations by 2030

The goal has been embraced by governments, corporations and non-governmental organizations (NGO), which are working directly or indirectly with affected societies through reforms, donations and any other means possible.

Investors join the war against poverty

The world of investing has always been about making money, but things are changing. Investors are becoming more socially and environmentally conscious and their investment goals have split between expanding their wealth and making a positive impact on the world around them.

Today, impact investing has become the norm, with billions of dollars flooding the market in adequately screened investments, focusing on entities that align their operations with SDG and ESG initiatives (Environmental, Social, Governance). Corporate Social Responsibility departments (CSR) went from being a cost burden to an existential necessity that represent employees and consumers values.

The change in investors' mindsets has given birth to mutual funds and ETFs that provide exposure to securities that work towards achieving ESG or SDG goals. It allows them to invest in opportunities that can provide wealth accumulation while making an impact.

SDG ETFs with the goal to eradicate poverty

Our Trackinsight ESG Observatory features two development bank bonds ETFs that help push the poverty-fighting agenda. A development bank is a supranational institution that funds different projects that have positive social and economic impact, with focus on emerging countries. Examples of such institutions include the World Bank, African Development Bank and the European Bank for Reconstruction and Development.

Funds raised from the issuance of development bank bonds are usually used to support projects that are in line with the United Nations 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals. These range from the development of core infrastructure to environmental protection. And since eradication of poverty is one of the most important SDGs, we believe that the ETFs below can help investors address that issue.

• UBS ETF – Sustainable Development Bank Bonds UCITS ETF (MDBE)

MDBE holds more than 100 development bank bonds from different banks, with different maturity dates and interest rates. (e.g. African Development Bank 0.75% 20-03.04.23 and European Bank For Reconstruction & Dev 0.50000% 21-28.01.26). The issuer, for example, the African Development Bank Group (AfDB), contributes to poverty reduction in its regional member countries (RMC) by spurring sustainable economic development and social progress. It uses proceeds from the bond issuance to grant concessional loans to the 38 most vulnerable and least developed countries in Africa, half of which are fragile and conflict-affected states.

• iShares $ Development Bank Bonds UCITS ETF (IDBB)

IDBB similarly hold bonds issued by Multilateral Development Banks (International Bank for reconstruction, Asian development bank etc..). Funds from bonds issuance are invested in projects in emerging and third world countries with the goal of improving the quality of life.

Interested investors should be advised that these ETFs can provide lower returns compared to other ETFs. To fully understand the composition and risk/return profile of these ETFs, it is essential to perform thorough due diligence before engaging in any investment activities.

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