It is one of those clichés that is also true—today’s youth are the future. For that reason, investing in the next generation is crucial to sustainable, equitable growth. Research from the Brookings Institution shows that boosting investments in children and youth from “cradle to career” may be the most effective path to improving stagnating social mobility rates in the US.
Although many efforts aimed at investing in young people are government-funded, the private sector and investors can also play an important role.
For many impact investors, achieving the United Nations’ Sustainable Development Goals (SDGs) is of particular urgency. Doing so requires active engagement with the global population of 1.2 billion people 15 to 24 years old, according to a UN report.
One approach to investing in the next generation is a “bottom-up” strategy. According to Brookings, the US federal government and many state governments have not enacted policies needed to improve youth well-being, either because they are paralyzed by partisanship or because they are ideologically opposed to such actions. In response, many communities are teaming up with businesses, nonprofit organizations, and other groups to support youth initiatives.
At the same time, governments and investors in some countries are taking a different approach. For example, a large consortium of mostly governmental players recently announced the Agri-Business Capital (ABC) Fund, an impact fund aimed at attracting private sector investment in rural areas of developing countries, thereby creating jobs, particularly for young people.
Globally, young people face many challenges, from high unemployment to low high school graduation rates in some countries. To address these issues, governments, the private sector, and investors in multiple countries are investing in youth in novel ways. In the area of job creation, for example, Grameen Impact Investments India and Acumen recently announced the LIFE SDG Bond, India’s first Sustainable Development Goals Bond for for-profit social enterprises. It will train up to 20,000 young people for employment, with a goal of attracting private investors who will adopt an impact-based assessment model.
As for efforts to invest in education, Brookings notes that two noteworthy social and development bond deals were announced in 2018: a development impact bond to fund improved learning outcomes over four years for more than 300,000 primary school children in India, and a social impact bond in South Africa aiming to boost registration of poor families with three- to five-year-olds in early childhood development centers. Three years earlier in India, the first education impact bond in a developing country was introduced with the launch of Educate Girls, which focused on increasing enrollment of out-of-school girls.
Investing in youth poses challenges for investors, as some initiatives in developing countries may be considered higher risk, and areas such as education may require buy-in from a surfeit of decision-makers. Yet there are signs of promise—by the end of year three, Educate Girls had exceeded its enrollment target.