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Investing Human Capital: A New Approach to Achieving the SDGs

By 3p Contributor

By Chris Jarvis

The private sector has direct access to financial and human capital. With the UN Sustainable Development Goals (SDGs) as a framework to provide a shared lexicon and to guide decision-making, the private sector can lead a global social movement ­– and corporations are in a unique position to leverage existing resources to help save the planet. Through IMPACT 2030, which provides the platform for investing these resources, the private sector can collaborate with other investors and measure the long-term return. But, what do we mean by “resources”? And how do we leverage these resources through IMPACT 2030 to get closer to achieving the SDGs?

How the private sector can change the world

In 2018, we bear witness to a radical expansion in the role of the private sector in social and environmental arenas. Until a few decades ago, the idea that businesses in the private sector invest more than the bare minimum to ensure compliance and avoid risk-related cost was novel at best; more commonly, it was deemed foolhardy, if not a breach of contract with shareholders. Yet, now we see the private sector moving well ahead of governments on key issues such as carbon emissions, gender parity, green supply chains and diversity and inclusion.

Though the evolution of socially-conscious business practice contains its fair share of cautionary tales (BP, Wells Fargo and Volkswagen), this shift in social and environmental perspectives across the private sector over the past four decades is still hopeful. Corporations hold great power; a power that is increasingly scrutinized and held accountable as new norms are established. And, beyond a willingness to be held accountable to the highest standard of business practice, corporations are leveraging their dollars and influence to make society and environment sustainable and resilient for the future.

The UN’s Global Compact outlines the critical business considerations of prosocial behavior using the UN Sustainable Development Goals. The SDGs “provide a historic opportunity to unite all global stakeholders to end extreme poverty, fight inequality and injustice, and protect our planet.” In the resource titled How Your Company Can Advance Each of the SDGs, the UN offers a rationale for such a leadership role and provides research, tools and practical steps. Corporations across the world are taking action and developing CSR strategies that revolve around the SDGs, but it is no easy task – and it can come with significant cost. How do businesses mitigate this cost while still pushing toward these important goals?

What Are the Costs?

Assuming a widespread leadership role for the private sector is, in fact, responsible and prudent, leaves the question: is achieving the SDGs even possible?

Estimates on the annual cost of achieving the SDGs (all sectors) range from about $US3.9 trillion to $US6 trillion. Given the current commitments of governments, and other organizations globally, this leaves a world-wide funding gap in the range of $3 trillion to $5 trillion annually. Ban Ki-moon’s, former UN Secretary-General, remarks at the at the 2015 UN Private Sector Forum ring with urgency:

“I am counting on the private sector to drive success. Now is the time to mobilize the global business community as never before. The case is clear. Realizing the Sustainable Development Goals will improve the environment for doing business and building markets. Trillions of dollars in public and private funds are to be redirected towards the SDGs, creating huge opportunities for responsible companies to deliver solutions.”

Is there an additional $US5 trillion in cash to be found to invest in achieving the SDGs on an annual basis? And if so, can financial capital alone solve global challenges? This is where human capital comes in.

A new way to invest: Human capital

While we typically rank financial capital as the primary and most important resource of the private sector for community investment, it is a distant second compared to human capital. Human capital refers to “the stock of knowledge, habits, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value.”

While few would dispute the importance of human capital as a key asset, the return is difficult to measure – corporations need to know the benefit of their investment. Leon Kaye wrote for The Guardian:

Determining the actual value of this intangible asset is a difficult nut to crack. In 1978, 80% of a company’s value was easy to enumerate because it was mostly tangible assets such as factories and equipment. But now 80%of a company’s value is comprised of intangible assets such as brand value, intellectual property and, of course, people.

Despite the difficulty of measuring intangible assets, the importance of human capital is front and center on the world stage. At the World Bank Group’s 2017 Annual Meetings this past October, the World Bank Group President Jim Yong Kim, introduced the Human Capital Project.

“This year, for the first time, we are including human capital in our measurement of the wealth of nations,” Dr. Kim said. “Human capital is about 65% of the wealth in high-income countries and only 40% in low-income countries. We’re helping low-income countries overcome this – and there is a sense of urgency – not only because we’re facing several current human capital crises, but also because accelerations in technology will require countries to urgently invest in their people if they hope to compete in the economy of the future. (read more here).

This past April, Bill Gates joined Jim Kim to underscore the essential role of investing human capital for the future of the planet. The support is clear, but there is an immediate and obvious question that must be addressed: How? How can the private sector invest human capital to bridge the funding gap and achieve the Sustainable Development Goals by 2030?

Employee Volunteering as Impact Investment

Employee volunteering has tremendous potential as a key mechanism to access human capital as a positive vehicle for business involvement in local and international development initiatives. Employee volunteering is an evolution beyond traditional corporate philanthropy and a one-way flow of investment in communities to enable a more dynamic exchange between corporate employees and key stakeholder groups representing community and civil society.

Mobilizing employees to voluntarily take action in communities where they live and work offers companies multiple entry points to address the SDGs. Employees who volunteer create access to a massive array of social networks as well as the social capital represented across those networks. This enables businesses to operate beyond an organization-to-issue threshold typically represented in most collective impact projects whereby organizations are viewed as the primary actor in providing solutions. Employee volunteering, when done correctly, emphasizes the potential of mobilizing employees as primary actors, working together with multiple stakeholders and across multiple geographical scales. This approach to mobilizing human capital holds the promise of real progress towards achieving the SDGs.

What’s required is a formal mechanism that can help bring together these global assets across multiple companies in a way that can improve both the impact and the overall value of the asset being invested.

This necessitates exploring human capital through the lens of impact investing.

IMPACT 2030: An Immediate and Practical Solution

IMPACT2030 is the world’s first ever impact investment fund for corporate citizens. The investment is human capital and the impact is progress toward the Sustainable Development Goals. This is an exciting prospect, without which the potential value of human capital investments may not be fully realized in the global effort to achieve the SDGs.

What is impact investing?

Before the highly popularized term “shared value,” Jed Emerson advocated for a blended value approach to investment so both the community and the investor would receive a meaningful return on investments. Over the past twenty years, the term ‘impact investing’ has come to mean “investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return. According to the Global Impact Investing Network (GIIN), the $22 billion investments of 2016 by just 200 self-identified impact investors will explode by more than 20% to $25.9 billion in 2017 (read the report here).

How is IMPACT2030 an impact investment fund?

  • It is impact investment. The goal of IMPACT2030 is to create an attractive return for investors while achieving meaningful social and environmental impact in the communities where those investments occur.

  • It is a fund with investors. Unlike most other impact investment funds, IMPACT2030 represents corporate citizens.

  • The fund invests human capital rather than financial capital. The potential return on investment in and through human capital is the only way to achieve the SDGs by 2030. The combined workforce of the IMPACT2030 investors is about 7 million people.

  • The fund uses the SDGs as a universal currency. Given the variety of industries, economies and nationalities represented in IMPACT2030, the SDGs not only provide a unified vision and shared objectives, they also represent the potential for meaningful conversion of value across those same variables. Similar to the ability to convert currencies into other currencies using foreign exchange rates, the SDGs may act as a globally accepted valuation for all types of human capital investments.

  • The human capital investments are voluntary. The key to ensuring a high quality of human capital investments is by committing to invest only through the voluntary actions of employees. This means that the private sector cannot dictate that employees contribute discretionary time to achieving the SDGs. All human capital contributions must be made by means of voluntary employee activities.
What are the benefits to investors?

  • Access to human capital assets. Companies around the world have difficulty accessing the value of human capital – especially when it’s voluntary. While voluntary participation is more effective and valuable than required participation, it is also more complicated. Realized Worth, as a Founding Partner of IMPACT2030 regularly offers insight, workshops and other forms of support to IMPACT2030 Partners and Stakeholders to ensure they are able to mobilize a greater number of employees on a voluntary basis throughout the year.

  • Regional priorities. Although a company may have operations in thousands of locations around the world, it remains incredibly difficult for managers responsible for employee volunteering to understand how to invest in regionally relevant ways while generating universal value to the brand. By working at a hyper-regional level across the globe through Regional Voice Leads IMPACT2030 is able to offer unparalleled insight for optimal impact investment of human capital. A great example of this is the meeting in Dubai, which addressed how best to align employee volunteering efforts with regional priorities.

  • Measuring the return on the investment. Better data on financial performance is the number one desire of impact investors. (As reported by Calvert Impact Capital). Simply put, measurement is hard. With the new frontier of the intangible asset of human capital, this kind of measurement becomes exponentially more difficult. IMPACT2030 is working on a multi-faceted approach with its partners to design a framework that will offer key insights as to the value of the human capital investment as well as a meaningful return for both the communities and the companies.
Join the IMPACT2030 Human Capital Investment Fund

Support people and the planet with us

This unique and historic impact investment fund represents a tremendous opportunity to help achieve the UN’s Sustainable Development Goals through employee volunteering. Tim Mohin, the CEO of the Global Reporting Initiative (a Founding Stakeholder of IMPACT2030) states:

“At a time when the revenues of large companies exceed the GDP of many countries and supply chains stretch around the world, the private sector plays a vital role in achieving the Sustainable Development Goals (SDGs).”

Consider the following action steps:

  • Partner with IMPACT2030 and invest the human capital of your company together with us to achieve the Sustainable Development Goals. Contact the interim CEO of IMPACT2030, Sue Stephenson, suestephenson@impact2030.com, for more details.

  • Invite your local leaders of community investment or CSR to attend an IMPACT2030 Regional Voice Forum and invest with us for a better return. Email Sabrina Viva, sabrina@realizedworth.com, to find out where the upcoming Regional Leadership Forums will occur.

  • Find out more about IMPACT2030 on the website.
Chris Jarvis is Chief Strategist, Realized Worth.

Photo: Realized Worth

Originally published on Realized Worth and distributed by 3BL Media.


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