M-RCBG Associate Working Paper No. 154
Establishing An Exchange-Traded Fund (ETF) For Children: A Policy Analysis Exercise (PAE) for Creating An Innovative Financial Vehicle for UNICEF
Yiqun (Quinn) Liu
In recent years, asset managers and asset owners are increasingly integrating environmental, social & governance (ESG) information into financial analysis and investment decision making. Investors have started to realize that ESG information is critical to sustainable investment returns and long-term portfolio management. As stakeholders pay more attention to sustainable development goals (SDGs) and sustainable investment returns, more and more investors start to explore outcome-driven investments for certain social issues that can lead to achieving SDGs. Increasingly, investors take active ownership in engaging with investees on ESG issues and urging for better ESG management and disclosure. There are also growing interests in sustainable investment vehicles and financial products.
While there have been financial products, including exchange-traded funds (ETFs), focusing on ESG, most of the investment themes have been quite broad and most of the financial products have mainly focused on environmental issues. Out of environmental, social and governance factors, corporate governance has always been a fundamental issue in investment decision making. In recent years, listed companies have started to expand the disclosure and evaluation of their carbon footprints as investors start to shift towards low-carbon portfolios. Unfortunately, there has been limited focus on the social factor of ESG so far. This is partly because social factors can be rather broad and their impacts are usually hard to measure.
Out of all the issues related to sustainable social development, one important issue is children’s rights. Children hold the future of the world in their hands. In order to have a sustainable future, we need to ensure that we provide high-quality education, safety, food, health and opportunities for children. Business behaviors and commercial products are exerting profound impacts on children around the world. All aspects of children's wellbeing and opportunities are influenced by corporate behaviors. However, there is very limited disclosure or measurement on how companies affect children. There has been barely any disclosure about companies' impact on children's health and opportunities, not to mention some companies even have child labor in their supply chains.
UNICEF, the global leader for child protection and inclusion, promotes policies and expands access to services that protect all children globally through its partnerships and initiatives. UNICEF aims to use innovative partnership structures to unlock the potential for private sector participation in children’s rights protection. Traditionally, UNICEF’s partnerships with the private sector have been focused on philanthropic donations and services. UNICEF aims to create innovative financial instruments and partnerships to further expand its impact through the financial market and participants in the financial market.
This policy analysis exercise (PAE) aims to address UNICEF’s problem of promoting children’s rights among business and investors through launching a new financial instrument that links investments with corporate impact on children. UNICEF also wants to raise sustainable funds for its children’s rights initiatives through the financial instrument. The PAE conducts an analysis on existing corporate impact on children as well as corporate disclosure on children’s rights. It also establishes a partnership framework for UNICEF to unlock the financial and social value in the financial markets while creating a methodology for a financial instrument with a focus on corporate impact on children.