Opportunity in America starts with fixing the internet, says social investing pioneer


Try achieving the America dream without a working internet connection.

The coronavirus pandemic has made it harder for Americans already living in rural or low income communities to keep up in school, the job market, or with their health without reliable, fast or affordable internet service.

Investors who aim to use finance to help address inequity, social instability and, yes, climate change, have been taking notice.

“Without question, access to broadband defines access to opportunity,” said John Streur, CEO of Calvert Research and Management, an early investor in sustainable and social finance. “When we think about what’s the root cause of inequality, access to opportunity or lack of access to opportunity is how it starts.”

Streur pointed to a new study from the University of Wisconsin-Madison that shows how COVID-19 has made life in rural and low-income communities in Wisconsin, which ranks 38th for internet access out of all 50 states, even harder without broadband.

A team of university researchers led by Tessa Conroy found that even before the pandemic, those on the winning side of Wisconsin’s “digital divide” often had higher home values, improved health outcomes, better entrepreneurship opportunities and higher educational outcomes than those living without fast internet.

“With the pandemic, these issues became all the more acute,” said Conroy, an assistant professor focused on regional economic development, in an interview with MarketWatch. “I knew there was a rural-urban divide, but sometimes the income divide is even more stark.”

Conroy pointed to low-wage food and hospitality workers in cities as particularly hard-hit by job losses. “These are not very high paying jobs to start off with,” she said. “Then if you cannot afford broadband, the very thing that might give access to federal programs, it can be more difficult to get help because you don’t have the ease, speed, and convenience of completing an online form.”

Rural, urban poor lack internet


University of Wisc.-Madison study

Streur at Calvert said there is a growing appreciation for how finance can improve lives, or the “social” component of the environmental, social and corporate governance (ESG) investing movement, not only “trying to put a price tag on environmental damage.”

He also likened the concept of government spending to build out broadband to forest management that helps prevent wildfires. “Let’s spend the money to fix the problem,” he said. “A lot people will have better lives and it would be a net win from a financial perspective.”

Eaton Vance Corp.
EV,
+0.15%

last year acquired the $30.5 billion social investing manager Calvert, giving it a significant leg up with a firm that can trace its ESG roots to 1982, when its mutual fund was the first to oppose investments with South Africa’s Apartheid government.

The popularity of ESG-focused funds has grown over the past decade, along with the sector’s solid performance and its adoption of better metrics to evaluate business practices.

Assets under management by exchange-traded funds in the sector has mushroomed 17,700% over the same period and high-scoring ESG funds have been outperformers of stock benchmarks, including the S&P 500 Index
SPX,
-0.31%
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according to a recent FactSet analysis.

“There is a significant argument to be made here, in terms of providing growth opportunities and economic opportunities,” said Karissa McDonough, chief fixed-income strategist at People’s United Advisors. “I think people are just coming around to the idea that infrastructure has moved beyond the railroads. Broadband is the pipeline of the 21st century.”

President Joe Biden also has made tackling climate change and social inequity priorities of his administration, saying he would look to spend $20 billion to expand rural broadband, while on the election campaign trail. Some experts in the telecommunications field said closing the internet gap in the U.S. could cost closer to $115 billion.

Read: Why remote work, schooling in rural America need Biden’s infrastructure plan

Research firm BroadbandNow released a new mapping tool to follow the progress made by companies granted funds by the Federal Communications Commission, the main regulator of U.S. airwaves, under its $20.4 billion budget to deploy broadband over the next decade where it’s missing.

So far, the biggest slug of government funding at $1.32 billion has gone to LTD Broadband, a company set up about a decade ago to provide fiber and fixed wireless internet service in the Midwest, followed by a subsidiary of Charter Communications
CHTR,
-1.50%
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as well as a mix of cooperative, public and private companies. Elon Musk, CEO of Tesla Inc.
TSLA,
-4.54%
,
received just under $1 billion in funding for his Space Exploration Technolgies Corp, or SpaceX.

“We are in a transition to a more sustainable economy,” said Peter Schwab, a high-yield portfolio manager at Pax World Funds, pointing to telecommunication, media, wireless and broadband providers as part of the digital infrastructure of the movement.

“We’ve been very focused on those sectors.”



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