Premier Miton Diversified Sustainable Growth Fund
In this edition of Sustainable Times, Neil Birrell, Chief Investment Officer and manager of the Premier Miton Diversified Sustainable Growth Fund looks at one of the long-term growth themes that form the basis of the fund’s sustainable investing approach
For information purposes only. Any views and opinions expressed here are those of the author at the time of writing and can change; they may not represent the views of Premier Miton and should not be taken as statements of fact, nor should they be relied upon for making investment decisions.
Investing involves risk. The value of an investment can go down as well as up which means that you could get back less than you originally invested when you come to sell your investment. The value of your investment might not keep up with any rise in the cost of living.
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Taking a thematic approach, particularly in a global context, provides several benefits. Looking globally, we see trends that emerge in a particular region before they spread around the world. Looking through a global lens also enables clearer comparison of the relative investment opportunity between competing companies.
The United Nations Sustainable Development Goals (SDGs) are a globally recognised framework for reporting sustainable outcomes. The 17 Sustainable Development Goals (SDGs) were adopted by all United Nations Member States in 2015 and provide a shared blueprint for peace and prosperity on the planet, now and in the future.
They recognise that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – while tackling climate change and working to preserve our oceans and forests. The SDGs are used to help define the sustainable growth themes and the investments in the fund are typically aligned with one of the themes.
The theme; financial inclusion
Whether opening a first bank account, or taking out a first insurance policy, the drive for greater access to financial products provides structural and sustainable growth. In this insight note we look at how financial inclusion supports fairer development, highlight some leading examples, and outline how the investment landscape may evolve over time.
Financial inclusion refers to efforts to make financial products and services accessible and affordable to all individuals and businesses, regardless of their personal net worth or company size. Financial inclusion strives to remove the barriers that exclude people from participating in the financial sector and using these services to improve their lives. It is also called inclusive finance.
As the World Bank notes on its website, financial inclusion “facilitates day-to-day living, and helps families and businesses plan for everything from long-term goals to unexpected emergencies.”
Why it is important
We believe strongly that increasing financial inclusion can drive economic development. According to World Bank studies, around 1.7 billion people globally lack access to financial services. A significant portion of these unbanked groups are women. Therefore, improved financial inclusion can also lead to greater gender equality and as Melinda Gates, the co-chair of the Gates Foundation said, “financial tools for savings, insurance, payments, and credit are a vital need for poor people, especially women, and can help families and whole communities lift themselves out of poverty.” We completely agree.
Financial inclusion is a key enabler of the UN Sustainable Development Goals, which will be key drivers in the reduction of poverty and enhancing shared global economic prosperity. This is important to investors as economic growth is a fundamental long-term driver of companies’ revenues and earnings, which supports share prices.
We can support financial inclusion…….
Investors can support financial inclusion by financing or investing in companies which are contributing positively through their products and services, while delivering attractive financial returns. For example, a company providing greater access to banking services via a mobile app, can aid financial inclusion on several levels. The ability to deposit savings more securely and efficiently, without the need to visit a physical branch, while also earning interest, is among the simplest benefits, and can help individuals in their planning and pursuit of longer-term goals.
Access to other products such as insurance, investment, payments, and borrowing, are also beneficial. For those individuals who are sole traders, these benefits may also extend to their businesses. At the same time, the company providing this access has the potential to benefit through growth in customers, revenues and profits. This should flow through and benefit shareholders.
….and benefit from it; examples of companies held in the fund that sit within the theme
HDFC in India and Bank Rakyat in Indonesia are companies using technology to offer financial services to those in remote areas via online and mobile banking. With wider adoption of these technologies during COVID lockdowns, we see a step change in access to these financial products for those countries with large elements of their population that have no, or limited, access to bank accounts or financial products.
Efficient and accessible financial products to manage financial risk and support companies in growing their businesses are also important. Although generally more prevalent in developed economies, this is expanding in developing economies and is important for their economic growth. We believe the role of financial exchange operators and insurance companies will play a key role in this. The fund holds shares in London Stock Exchange Group, Aon and Intercontinental Exchange and we are engaging with them to better quantify and disclose the positive impact on society of their technology and product offerings.
As the world develops socially and economically, and technology advances, it will be key to ensure the whole population is included; access to financial products is fundamental to that.