Fighting Global Poverty with Equity Investment

Tackling global poverty requires more than just charity. Investors can contribute to the effort—and find good sources of return potential—by focusing on companies that behave ethically or provide solutions to key poverty-related challenges.

Nearly 1 billion people have escaped poverty since the turn of the century. But the war on poverty is far from over—and the scale of the problem is enormous. We believe that securing future improvements will require bigger efforts from the private sector and investors, who can draw on The UN Sustainable Development Goals as a useful guide.

Extreme Poverty Has Fallen Sharply

How is poverty measured? Typical statistics focus on the number of people falling below a level of income or consumption, such as the current international poverty line of US$1.90 per day. In 1999, there were 1.7 billion people—or 28.6% of the global population—living in such extreme poverty, according to The World Bank (Display). By 2013, those figures fell dramatically to 769 million and 10.7%, respectively, a reduction of about 1% per year. Many global leaders hope that rate of decline can continue, which would eliminate extreme poverty by 2030. However, we think some caution about the potential to completely eradicate poverty is warranted for several reasons.

Further Progress Will Be Challenging

First, a very small group of countries has driven virtually all the decline in global poverty this century. China alone accounted for half of the global reduction. Together with India, Indonesia and Vietnam, these four countries represent half the world’s population and were responsible for 83% of the decline in the global poverty rate. Collectively, these countries’ poverty rate fell from 41% in 1999 to just 9% in 2013. With extreme poverty nearly eradicated in these four countries, they won’t be able to contribute meaningfully to future global reductions.

Second, the remaining countries with the poorest populations have had far less success fighting poverty. In sub-Saharan Africa, for example, the extreme poverty rate has dropped since 1999, but still exceeds 40%. Many of these countries suffer from landlocked geographies, high rates of disaster and disease, bad governance, and conflict. These deep structural challenges make the “last mile” of poverty more difficult to conquer.