Africa: Opinion - What Is Value? in the 21st Century, the Answer Cannot Be Profit Alone

Lab technician Amina A. Rafat takes blood samples from food vendors in Adiebeba, a suburb of Kumasi, so they can test them for Covid-19.
opinion

The financial system we depend on has broken. We must increase impact investments to create a better, fairer and greener future

Covid-19 has magnified every existing inequality in our societies. The human suffering caused by the pandemic has been felt globally, disproportionately hitting those who are most vulnerable. Data released by the Bill and Melinda Gates Foundation this week shows a shocking 7% increase in extreme poverty as a result of Covid-19.

And while billions of people are hurting, a few have been looking out for profits: in April, rather than channelling funds where they are needed most, a rush of private investors entered the stock market, hoping to pick up bargains amid the falling shares of FTSE 100 companies.

One thing is clear, the system we depend on is broken. Governments tax us all to remedy the social and environmental damage that many companies create. We must reassess our assumptions about our economies, starting with the question, what is value? In the 21st century, the answer cannot be profit alone.

Impact investing has a major role to play in shaping the post-Covid world. By putting impact at the heart of our economies, we can address deep-rooted inequalities and manage the social and environmental challenges ahead. Through impact transparency, we can help to achieve a just, impact-led Covid-19 recovery that serves all people and preserves our planet.

The good news is that the impact investment movement has already created an achievable roadmap. During the Global Steering Group for Impact Investment's (GSG) Global Impact Summit last week, 250 CEOs, executives, business leaders, philanthropists and government figures came together to outline the three areas of action that must be implemented to overcome these challenges.

We must increase impact investment to combat unemployment, reduce social inequalities and preserve the environment. Impact investing is the key to creating sustainable jobs, advancing education, improving healthcare and funding the expansion of non-profit organizations that support the most vulnerable.

In developing countries, we need to boost impact investment to finance the growth of small and medium-sized impact-driven businesses. SMEs make up 90% of businesses and 80% of jobs in Africa, but they are struggling to keep afloat. Impact investing provides them with a critical lifeline, protecting lives and livelihoods.

We must demand that companies publish audited financial accounts that reflect their social and environmental impact. Impact accounting will provide the transparency needed to hold businesses accountable for any harm they cause, and reward them for the positive impact they create.

To emerge from this crisis sooner and in a better position to meet difficult challenges, we must shift our economies from profit alone to both profit and impact. We can help transform our economies by requiring company directors and trustees of pension funds and charitable endowments to consider both profit and impact in their decision-making.

We are at an historic crossroad. There has never been a greater need or a better time to bring impact to the centre of our economies and build the kind of world we want to live in. And this idea has already started gaining momentum: UBS, which manages $2.6 trillion in assets, is now advising private clients to opt for sustainable investments over more traditional options.

The GSG and the wider impact investing movement have started working towards these actions, including many who have now added their name in support of these objectives. We call on everyone - governments, citizens, consumers, investors, companies and philanthropists - to support the implementation of these key measures and pave the way to a faster recovery and a fairer, more sustainable world.

Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.

Sir Ronald Cohen is the chair of the Global Steering Group for Impact Investment.

Cliff Prior is CEO of the Global Steering Group for Impact Investment.

More From: Thomson Reuters Foundation

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