Becoming better ancestors

Children are our future - future consumers, workers, innovators and caregivers. Yet, despite their significance, their interests are often overlooked in economic and financial decision-making. Governments focus on short-term election cycles, corporations prioritise quarterly earnings and individuals follow market trends. This short-termism contributes to many of today’s most pressing global challenges, including climate change, biodiversity loss and economic inequality.

Or as philosopher Roman Krznaric puts it: “Short-termism threatens to drag us over the edge of civilization breakdown.”

Even if we don’t reach this point, neglecting long-term thinking ultimately harms children and future generations, leaving them to deal with the consequences of our actions and decisions. As investors, we have the opportunity - and the responsibility - to adopt a forward-looking approach. Applying a child lens to investment decisions is one way to ensure we leave behind a more equitable and sustainable world.

How to apply a child lens to investing

To bring the concept to life, let’s start with a thought experiment: Picture the world you want future generations to inherit. Do you envision thriving rainforests, unspoiled coral reefs and a planet where polar bears exist outside of zoos? If so, environmental sustainability is a key priority. But perhaps you also envision a world where children have access to healthy and nutritious food, and to quality education and adequate healthcare. These are urgent challenges that children already face today.

Triodos’ Future Generations strategy is structured around both long-term sustainability goals as defined in the UN SDGs and immediate needs, using the goals from UNICEF’s* strategic plan (see the image below) as a guiding framework.

There are five key areas where investors can make a tangible impact. In our research we have found that these areas offer many investment opportunities that contribute to child wellbeing and offer an attractive return.

1. Child health and survival
The challenges related to food and healthcare are immense. In 2022, malnutrition affected more than 200 million children worldwide, underscoring the scale of this global crisis. Poor nutrition can lead to stunted growth, underweight children and, in some regions, even childhood obesity. Investing in food companies that provide healthy and nutritious options is essential. Dutch company Acomo, which specialises in organic soft commodities like nuts and spices, aligns with this goal by ensuring access to high-quality food ingredients.

Healthcare is another critical area. Children require treatments tailored to their unique physiological needs, yet pediatric medicine often faces hurdles like costly regulatory requirements and limited research. Investing in companies that prioritise pediatric healthcare ensures better medical outcomes for the youngest and most vulnerable populations.

2. Access to education
Education is a key driver of social and economic development. In 2023, an estimated 250 million children worldwide did not go to school. Even among those who do attend, access to quality education remains a significant challenge. We therefore focus on companies that improve the accessibility and quality of education. A good example is US company Stride, which provides virtual education services. These services enable children that do not fall into the regular (public) school system to receive quality education.

3. Protection from violence and exploitation
Perhaps the best-known issue child protection issue is child labour. Preventing it requires addressing root causes, such as ensuring parents earn a living wage so their children are not forced to work. While direct investment in child labour prevention can be challenging, online safety is another urgent area of concern. Children are using the internet from an increasingly young age, and without proper safeguards, many are exposed to inappropriate content or become the victims of cyberbullying. Companies that provide cybersecurity solutions are interesting investment options here.

4. Safe and clean environment
A livable planet is essential for children to grow and thrive, both now and in the future. The lack of access to clean water, for example, can havelife-threatening consequences. Ensuring a safe and clean environment requires a range of coordinated solutions. Investing in solutions that support environmental sustainability, such as renewable energy, water infrastructure and effective recycling systems, is critical to securing a better future for all children.

Even if many of the products and services relevant for this theme are not specifically for children, we believe that the benefits of long-term investments in water infrastructure or renewable energy generation accrue mostly to the future generations. A good example in our portfolio is the Brazilian water utility SABESP. In the Brazilian state Sao Paulo not everyone has access to clean water yet. The company, however, has embarked on an ambitious investment program that aims to deliver universal access to water by 2029.

5. Equality and inclusion
Where a child is born still largely determines their chances in life. For girls in low-income countries, the likelihood of facing systemic disadvantages is significantly higher. However, technology holds the potential to break down these barriers. Access to a smartphone, for example, can open the door to financial tools, educational resources and social connectivity, paving the way to social and economic inclusion.

Investing in telecommunications infrastructure in emerging markets ensures that young populations benefit from these advancements. By enabling digital access, investors can help bridge the opportunity gap and foster economic growth where it is needed most.

The investment case for a child lens approach

Applying a child lens to investing is not only about social responsibility - it also makes financial sense. Investing in child-centric impact themes, such as food, healthcare, education and infrastructure, means investing in essential services. This focus can create a resilient and diversified portfolio, less susceptible to short-term macroeconomic fluctuations. We see evidence of this in our Future Generations strategy. It has lower volatility compared to the reference index. The beta is also well below one. Furthermore, applying a child lens leads to a portfolio with different allocations. For example, health care and consumer staples are the sectors with the highest weight in the Future Generations strategy. Generally speaking, this is not the case for impact strategies. This makes it complimentary to existing impact portfolios.

Yet, the goal of this article is to convince investors to include children’s needs in their investment decision making. Each investor has unique guidelines, preferences and restrictions. So, naturally, there will be different approaches to Child-Lens Investing. And that’s a good thing, as it offers flexibility in its application, ensuring alignment with different strategies and risk profiles.

As investors, we play a crucial role in shaping the world future generations will inherit. By applying a child lens to investing, we can move beyond short-term returns and focus on building a sustainable, inclusive and thriving global economy.

Disclaimer

Neither UNICEF, nor its partner in Luxembourg, Comité luxembourgeois pour l’UNICEF, is acting as an investment adviser and neither of them has had or will have any role in the design, structuring, development, management or operation of the Triodos Future Generations Fund. UNICEF, and the Comité luxembourgeois pour l’UNICEF, have not been and will not be involved in the management of the Triodos Future Generations Fund, including its investments decisions. Neither UNICEF nor the Comité luxembourgeois pour l’UNICEF has endorsed Triodos IM, Triodos SICAV I, the Triodos Future Generations Fund or any investment by the Fund. UNICEF and the Comité luxembourgeois pour l’UNICEF make no recommendation as to investment in the the Triodos Future Generations Fund.

The sole role of UNICEF, and the Comité luxembourgeois pour l’UNICEF, is to receive the donation from Triodos IM and apply such donation to UNICEF’s programmes for children. UNICEF and the Comité luxembourgeois pour l’UNICEF will have no liability to the Triodos Future Generations Fund or investors in the Fund in relation to investments in the Fund, the performance of the Fund or otherwise in connection with the Fund. UNICEF is immune under international law from every form of legal process.