“When it comes to children's rights and child welfare, investors may think that regulations are already in place. Governments have set out rules, and you rarely hear about child labour anymore. Jan van de Venis, Ombudsperson of Future Generations, understands the sentiment, but he is critical. "Yes, there is a lot on paper, but ultimately the market has to put it into practice. This is what is lacking. Looking at the Netherlands alone: children are five times more likely to develop asthma than elsewhere in Europe. Around IJmuiden, asthma is as much as ten times more common. The government is doing too little."Van de Venis argues that companies should include future generations or a Future Effect Report in their ESG reports and that they should also pay more attention to screening their business partners in countries further afield. "That would be a good start. Now, it is too easy for many companies. Only 2% of the 700 largest companies worldwide meet the due diligence requirements of the OECD guidelines.”
A good future for children requires wide-ranging action
The Future Generations theme fits into Triodos IM's commitment to a sustainable world, says investment expert Sjoerd Rozing. "Children are the future. And it’s this future we need to worry about. Nutritional problems for children are widespread. You even see this in the Netherlands: children who eat too little or unhealthily. Investors can play a role here by investing in companies that offer healthy food for children. But also consider medicine and education."
Rozing does not think that this is something that can be left to governments. "Then you end up in the same discussion you heard with climate change: shouldn't the government be the one to deal with such a big problem? Yes, strict regulations are needed, but companies, investors and consumers must also play their part."
You not only want to exclude harmful activities, but also hold companies accountable for their social responsibility. Capital providers have the opportunity to put the interests of future generations on the agenda. Rozing: "An increasing number of companies are no longer just looking at shareholder value, but at the interests of all stakeholders. We believe future generations belong on that list of stakeholders."
Companies that focus on solutions to improve the position of children now and in the future also offer an attractive investment in terms of return. This makes child welfare and the wellbeing of future generations a good investment theme, Rozing argues.
Key challenges: climate, biodiversity and water
Van de Venis: "Biodiversity and climate are a time bomb that we are passing on to future generations. You see ever more extreme weather conditions in Asia or in Africa, such as water stress in densely populated areas of Thailand and Bangladesh. This can mean drought and a shortage of drinking water, which can even lead to armed conflict, as well as flooding due to excessive rainfall. In these places, clean drinking water is already relatively a lot more expensive than in countries like the Netherlands."
Van de Venis points out the importance of awareness. Ways to do this include using tools such as Unicef's child rights index, which investors can include in their ESG screenings. In the Netherlands, the Lab Future Generations works on Future Impact Reports. These allow companies to visualise the impact of decisions on future generations.
Van de Venis recognises that it will take more than ticking boxes. "In everything you do, always ask yourself what the added value is for future generations. Within companies, you can safeguard this with a notional position for future generations or the environment on the board of directors. We are still a long way off, but there are hopeful examples. Clothing company Patagonia recently decided to hand over all its profits to fight climate change." He also points to the trend of nature reserves get rights, sometimes by becoming a legal entity, so that they can hold others, among which companies, accountable for their behaviour, such as polluting activities. "We should also give rights to future generations, as their interests already lie in the present. "
Selecting the right companies
In addition to excluding activities that harm people and the environment, Rozing selects companies that demonstrably contribute to improved child welfare, such as good nutrition, hygiene and clean drinking water. "Think more broadly about things like company childcare facilities. Children can spend more time with their parents, and at the same time you become more appealing as an employer and increase employee loyalty. In the short term, this costs money, but it will pay for itself."
Companies must meet the sustainable criteria that Triodos IM applies to all its funds. Important criteria within Future Generations are stopping child exploitation, providing access to basic needs and healthy nutrition. Obviously, the companies must also have a sound financial base. "The strategy is still new, so it is difficult to present a financial track record, but we now have a portfolio of 32 listed companies that are making a difference. This gives investors a tool with which they can achieve impact as well as returns."