Towards a More Equal Tomorrow - Karin Huizinga (Can Investments foster social inclusion?)
“€285 million to support jobs, skills and social inclusion in France, Germany and Romania”[1] “Commission launches toolkit to support social housing in Member States”[2] “InvestEU kickstarts €250 million of investments in affordable social housing, skills and social enterprises”[3]
In recent years, stimulus packages like these have emerged in the education, social housing, and healthcare sectors. However, the gap between rich and poor continues to widen. Income inequality is rising, in parallel with the discrepancy in health between people with a different socio-economic status. Nothing seems to be worse for your health than poverty.[4] If so many investments are being made to reduce this gap, how is it possible that it is only getting bigger?
- Statistics on income inequality and health discrepancy
Income inequality: About 25 years ago, the 10% richest people in OECD countries had 7x higher disposable income than the poorest 10%; today, this factor has increased to 9.5x. [5]
Health discrepancy: Not only do the poorest individuals in the Netherlands live about 8 years less than the richest, but they also have an average of 24 fewer years of healthy life. [6]
The illusion of progress: Structural inequalities, wealth concentration and short-term gains vs. long-term impact
As we celebrate investments in social housing and education, it is essential to recognise that the effects are not as straightforward as the narrative. While the numbers – the new jobs created, improved medical facilities, and expanded educational opportunities – paint an optimistic picture, several critical factors remain obscured.
Firstly, structural inequalities persist within our society, significantly impacting both education and healthcare. In education, children from low-income families face greater challenges, often falling behind their wealthier peers due to limited access to enriching activities and resources. This results in a restricted view of their future potential, with fewer role models to inspire careers in fields like for example law or medicine. In healthcare, despite equal access in the Netherlands, practical barriers exist for those in lower socio-economic groups. Issues such as inflexible work schedules and fear of job loss make it difficult for them to seek timely medical attention. Additionally, poor diet and literacy challenges further hinder their ability to maintain good health.
Secondly, while investments may spur economic growth, wealth is often accumulated disproportionately among a selected few. This concentration widens the gap between the wealthy and the rest of the population.
Balancing short-term gains with sustainable, long-term impact is a delicate task. Immediate results, such as job creation, are important. However, we must also focus on lasting effects, such as investments that address underlying issues and promote well-being over time.
How can we truly contribute to an inclusive society?
One effective way to contribute to an inclusive society is through targeted investments that prioritise minority groups and underserved communities. For instance, investing in companies that provide affordable housing solutions can have a significant impact on economically disadvantaged populations. Funding energy efficiency programs in social housing, like our investment in Circreate, not only reduces utility costs but also improves living conditions for residents.
Take the example of a rental company that offers laptops to low-income families; such initiatives can bridge the digital divide and enhance educational opportunities for poor children. Similarly, private debt investments in pharmaceutical companies that further develop orphan medicine can provide life-saving treatments for individuals with rare medical conditions, who often lack access to vital medications. By directing private debt investments towards impactful businesses like these, we can help create a more equal society where everyone, regardless of their socioeconomic status, has the opportunity to thrive.
Pillars of Colesco's Inclusive Society theme
Inclusive Society
Colesco aims to support the transition towards a more inclusive society and has identified underlying outcomes and sectors, to ensure a robust thematic focus.Financing the transition to a more inclusive society by investing in companies that enable the accessibility, quality, and/or affordability of: Education, Healthcare, and Healthy Living.
The value of profitable business models
Profitable business models are essential in driving economic growth and fostering innovation, yet they come with their own set of challenges. The profit-driven nature of investments can sometimes lead to increased inequality, as companies might prioritise financial returns at the expense of accessibility and equal opportunities. It is important to keep in mind that money is the language we speak in the business world and that this is not likely to change. However, profitability can be a powerful force for good, especially when supported by safety-net policies such as labour rights, codes of conduct, and corporate social responsibility (CSR) initiatives.
We need to recognise that making a profit is not inherently bad - as well-known professor Michael Porter explains in his Creating Shared Value framework, businesses create economic prosperity by both making a profit and meeting societal needs. When businesses act as businesses, and not just as charitable donors, they can contribute to sustainable funding and innovation with the profitability created and thus improve factors such as affordable housing and public health.[7] By focusing on long-term impacts and creating value for all stakeholders, businesses can foster an inclusive economy that benefits everyone. This dual approach ensures that profitability and social justice are not mutually exclusive, but rather, complementary goals that drive meaningful progress. However, this is theory, in practice the debate is not always as straightforward.
The way forward
Private debt investments can play a role in shaping our education and healthcare systems. The road to inclusivity is a difficult one, discipline and a long-term view is required. By fostering collaboration among investors, policymakers, and businesses, we can bridge the gap between economic prosperity and social well-being. Healthcare and education are asking billions of investments, also in the upcoming years, for example in technological developments that make services and knowledge more accessible than ever. By deploying institutional capital we can make a difference: uniting capital and purpose.
[1] REACT-EU: €285 million to support jobs, skills and social inclusion in France, Germany, and Romania | European Social Fund Plus (europa.eu)
[2] Commission launches toolkit to support social housing in Member States | European Social Fund Plus (europa.eu)
[3]https://ec.europa.eu/commission/presscorner/api/files/document/print/%20en/ip_23_3803/IP_23_3803_EN.pdf
[4] The Health gap in Europe (amsterdamumc.org)
[6] The Health gap in Europe (amsterdamumc.org)
[7] CSV Explained - Institute For Strategy And Competitiveness - Harvard Business School (hbs.edu)