The multiplier effect
At Credit Suisse, we believe in the multiplier effect of investing in education, be that for profit, through philanthropy or by supporting charitable organizations. The recent Goalkeepers Report, established in 2017 by the Gates Foundation to chart progress towards the SDGs, highlighted the importance of investing in young people – especially in their education and health.
“If an individual’s investment in education can help reduce mortality, increase peace and security, stem the effects of climate change, lift people out of extreme poverty and foster economic prosperity – all while generating a financial return – we think the attractiveness of the investment case speaks for itself,” says Marisa Drew, CEO Impact Advisory and Finance at Credit Suisse.
Mapping the connections
By injecting capital into education systems, investors can see the benefits flow beyond an improvement in living standards for the individuals concerned. An effective investment strategy can contribute to increased economic growth and greater participation in civil society.
To support that case, we sought evidence and insights on the links between improved levels of education and achieving the economic, health, equality and environmental goals as defined by the UN SDGs.
However, SDGs do not easily lend themselves to statistical analyses. Rather, the way to evaluate their impact is to look beyond formal, traditional metrics of educational attainment.
Katerina Neureiter, Executive, Impact Management, CDC Group, explains that, in higher education, CDC measures the payback period of the degree and the estimated salary increase as a result of gaining a qualification. “In one of our investments, we are currently undertaking an in-depth survey of graduates and current students to look at why they're studying and the impact their degree had on their life outcomes,” she says. “Was it monetary? Have they achieved an increase in salary or was it more their confidence? And is there some other impact that we wouldn't necessarily see?”
Our in-depth research of more than 200 academic and non-academic papers, 400 data points, and consultations with leading education experts (see About the Research for more details) set out to understand the multiplier effect in a more formalized way. It reveals that there are indeed strong, positive and logical links between education and all SDGs. While the evidence is undeniable in some areas (health and women, in particular) it calls for more research and debate in others (managing conflicting environmental impacts, for example).
To achieve SDG4 will require a willingness to exploit these connections and challenge conventional thinking.
Change from the top and the bottom
It is estimated that more than 170 million people would rise out of poverty if all students in low-income countries left school with basic reading skills1. Such an impact can only be achieved with system-level change.
For this reason, leading non-profit Room to Read is systematically demonstrating the effectiveness of its work to governments through cost-benefit analyses. Its aim is to integrate its best practice into government education systems. CEO Dr Geetha Murali says: “We’re trying to shake up the entire system in a way that’s cost effective and shows governments that if they just spend the resources they have more efficiently and in a more focused way, they can get better learning outcomes for their children.”
Across the education sector, there is room for high-impact interventions that cannot be solved by a business case alone.
Jasjit Singh of the INSEAD Social Impact Initiative gives the example of funding high-quality pre-school programs for at-risk children from deprived inner cities in the US. “We know that it's very hard to make money in this instance,” he says. “But at the same time, we know that for every dollar invested, society benefits in other ways, such as reduced crime levels.”
Productivity and purpose
According to the World Bank’s Global Human Capital Index, the world has developed only 62% of its human capital. This means the world is only 62% as productive as it could be2.
The need to invest in the development of human capital is now even more pressing, as a growing range of skills are required to ensure success. We must invest to prepare for that future. “We have kids starting primary school who will graduate into a world in which machines will be smarter than people,” says Karl Richter, Executive Director of EngagedX (and former Head of Research and Knowledge at the UNDP’s SDG Impact Finance initiative). “So, what are we doing to prepare them for that future?”
A number of organizations recognize the mix of skills needed to succeed in the modern world. Aflatoun International is one. It seeks to empower children and young adults worldwide with personal, social, financial and business-related skills and knowledge to help them achieve equality of lifestyle and career prospects.
But it is not just about preparing individuals to succeed. “It will be hard to make and sustain progress on the SDGs without ensuring that kids are gaining not only skills and knowledge, but the awareness of their place in the world and sense of agency and values to shape a better future for all of us,” says Wendy Kopp, CEO of Teach For All. “The kids in our classrooms today will soon be our emerging leaders and citizens.”
A high-power connection
Our research reveals that education has a powerful impact on raising incomes, reducing poverty and hunger and creating more resilient societies.
At the individual level, one additional year of schooling increases earnings by 10% overall and by 20% for women. At the societal level, universalizing upper secondary education in low-income countries could increase per capita earnings by 75% and lift 60 million people out of poverty3.
Education for women – or the lack of it – has a particularly strong impact on economies. Gender inequality in education is estimated to cost some countries up to $1bn a year. The loss in human capital wealth, as many adult women fail to benefit from secondary education, is estimated at $15-$30 trillion globally.
If all women were educated to secondary level, child marriage would be reduced by 64%4. Even if all women completed just primary education, this would reduce death in childbirth by 66%5. The Campaign for Female Education (CAMFED) recognizes this; founder Ann Cotton set up CAMFED to support marginalized girls to “go to school, succeed and lead.” It has since directly helped more than 2.6 million children to access primary and secondary education.
Education reduces the incidence of malaria and other diseases by sharing the knowledge of prevention, including the need for sanitation and access to clean water – meaning there is a strong connection with SDG6 (ensure availability and sustainable management of water and sanitation for all). The link works both ways – in Africa, access to piped water has increased school attendance by between 2% and 16%6. And the links between access to clean water, education and health are clear. In Nigeria, it was estimated that guinea worm disease, a parasitic infection caused by poor-quality drinking water, was responsible for 60% of all school absenteeism7.
Improved education is helping local populations and global consumers understand the catastrophic potential of maritime debris. And enlightened retailers and manufacturers are using recycled materials to make us change how we produce and consume.
Basic education is critical to improving agricultural productivity and farm incomes. This in turn reduces hunger at the societal level, which is supportive of a child’s ability to learn. Undernutrition is associated with delayed school enrolment, impaired concentration, more schooling lost to illness and drop-out before completion.
Lanmei Agriculture, an investee of Credit Suisse’s proprietary Asian Impact Investment Fund, is one example of this in action. For the past eight years, Lanmei Agriculture, by capitalizing on demand in Chinese cities for superfoods such as the high-value blueberry crop, has provided famers with training and technical support and, crucially, a sustainable path away from rural poverty, typically doubling farmer incomes.
2 World Bank Global Human Capital Index
3 Global Education Monitoring Report 2016, UNESCO
4 Global Education Monitoring Report 2013/14, UNESCO
6 Rural domestic water consumption behavior: A case study in Ramjerd area, Fars province, IR Iran, 2006, Keshavarzi, A. R., Sharifzadeh, M., Haghighi, A. K., Amin, S., Keshtkar, S., & Bamdad, A.
7 Infrastructure and Poverty Linkages. A Literature Review, 2002, Brenneman, A., & Kerf, M., World Bank