Eradicating global poverty requires R$ 8.4 trillion a year, says study

A study prepared by Citi in partnership with the University of Oxford points to the need for investments in the amount of US$ 1.6 trillion per year — R$ 8.4 trillion, equivalent to Brazil’s annual GDP (Gross Domestic Product) — to eliminate the problems that are at the root of world poverty.

The work is based on the global Multidimensional Poverty Index (MPI), produced by the UNDP (United Nations body) and the University of Oxford.

In October last year, the report pointed out that in 109 countries, where 5.9 billion people live, 1.3 billion can be considered poor in terms of metrics such as access to sanitation, education, health, energy and housing —4,2 billions have at least one of these deficiencies.

The new study also estimates that investments used to fight poverty can have a major impact on economic growth through significant multiplier effects.

Every dollar spent on education, for example, has an effect of $2.4 on the economy. The estimate is an annual investment need of US$ 340 billion in the area.

In access to water and sanitation, the annual investment of US$ 79 billion is multiplied by 5.5.

According to those responsible for the work, investments in these areas have a significant return in economic terms, in addition to the obvious social benefits.

“If done correctly, the multiplier effect of capital employed in many of these measures can also provide a stimulus for growth,” says the “Eliminating Poverty” report, which is a partnership between Citi and Sophia Oxford, a social enterprise at the University of same name.

According to the authors, eradicating poverty should also be a goal of the business and financial community, as it can boost economic growth and lead to a larger, more educated, healthier and more engaged workforce. In addition to increasing consumer purchasing power, generating entirely new sources of customers and demand, “a virtuous circle both socially and economically”.

“We should not view poverty eradication as a purely moral duty that comes at a great financial cost. It is also a huge financial and social opportunity,” says Andrew Pitt, global head of research at the Citi Institutional Clients Group.

Traditional approaches to the poverty line linked to income, which leave aside other issues of access to better living conditions, point to a number of poor people. In 2017, there were 689 million people below the World Bank’s international line of $1.90 a day – that’s almost one in ten people on the planet. In 1990, the problem affected 36% of the global population at the time, almost 2 billion people.

The Multidimensional Poverty Index shows that in 2018 about 773 million adults were classified as illiterate. In 2019, 771 million people still did not have electricity and 2 billion did not have access to basic sanitation.

“Poverty is not a niche, isolated or specific problem. It is all around us, it takes many forms, for example education, health, employment and assets, and it still plagues many lives,” says Jamie Coats, President and CEO of Sophia Oxford.

According to the work, the rise of sustainable, responsible and impact investing is another favorable aspect to direct capital towards poverty eradication.

There are currently around US$ 35 trillion in investments linked to ESG principles, an acronym for good environmental, social and governance practices.

“The capital is there and it not only wants to invest sustainably, but wants to demonstrate how it is investing sustainably,” the report says.

The task of the financial community is to mobilize this capital by creating suitable investment vehicles such as social and sustainability bonds that can help emerging markets access the capital needed to fight poverty.

“How many times do we come across an investment opportunity in the trillions of dollars, with ready cash, attractive returns and multiplier effects on offer, which can bring immeasurable benefits to society and dramatically improve the quality of life for billions of individuals around the world? Combating poverty represents just such an opportunity,” says the report.