The gap between those who have access to digital technologies and those who do not has persisted for more than 20 years. The 2020 COVID-19 pandemic both newly highlighted and exacerbated these inequities, alerting investors to the need for promoting broader digital access.
The Global Digital Divide
According to the United Nations, approximately half of the world’s population lacks ready internet access. This discrepancy affects wide-reaching facets of life, from education to job opportunities. While the digital divide exists in many areas of the world, including in the United States, it is particularly acute in developing countries. Internet penetration in the developed world is 87% compared with 47% in developing nations and 19% in the least developed countries.
This lack of internet access means that economically disadvantaged populations face additional obstacles to making a living or advancing their education. Inevitably, these lost opportunities contribute to further marginalization. “Without question, access to broadband defines access to opportunity,” Calvert Research and Management CEO John Streur recently wrote.
The pandemic has intensified these inequities. For example, less digitally connected students have had additional difficulties participating in remote learning. In the US, about one-third (36%) of lower-income families at the start of the pandemic said it was at least somewhat likely their children would not be able to complete schoolwork at home because they lacked access to a computer. Forty percent of African American and 30% of Hispanic students in K–12 schools received no online instruction during the pandemic compared with 10% of white students.
The Role of Investors
Addressing the digital divide could have profound consequences for populations struggling with inequality and inadequate opportunity. The United Nations designated access to the internet and information technology as one of the key aspects of Sustainable Development Goal 9, which targets industry, innovation, and infrastructure. Furthermore, experts point to internet access and infrastructure as vital to achieving other SDGs, such as those related to education, health, and financial inclusion.
In the US, some advocate for government intervention in closing the digital divide while acknowledging the potential need for private investment as well. One proposed solution looks to major tech companies to invest in internet access and tools for low-income Americans.
Investors seeking to address the digital divide have started targeting a variety of opportunities ranging from public equities to private debt aimed at building digital infrastructure to broaden access to the internet. For example, in 2019 a communication service provider issued a social bond to help raise money for capital expenditures. At the same time, the provider was also expanding network infrastructure in underserved communities. To that end, the issuance included guidance on such impact metrics as the number of homes connected and number of women trained in online skills.
Two former top corporate executives also recently launched Epiphany Community Impact Fund, an infrastructure fund targeting broadband access in underserved areas in the US. “With access to adequate capital, these communities will be able to work toward reducing/eliminating the digital divide, which will translate to better educational, economic, and entrepreneurial outcomes,” said former Marathon Oil treasurer Morris Clark and former JPMorgan Chase executive Otis Ellis in a recent interview between the two fund managers.