Education may not always top the list when investors think of promising opportunities, but it should. As a basic human need, it represents a key impact theme with substantial growth potential. The sector offers diverse exposure, catering to a wide range of investment strategies, from listed equities to private debt. Recent developments such as the COVID-19 pandemic and the rise of Generative AI have made the sector even more interesting from an investment point of view.
The investment case of education
In the 19th century, Horace Mann, the pioneer of American public schools, called education the ‘great equalizer of the conditions of men’. His message still resonates today. Education empowers individuals, opens doors to opportunity, and fuels personal growth—proving its timeless role in shaping a fairer, more equal society. As impact investors, we recognise education as a crucial investment theme. It plays a vital role in preparing children for the future and providing them with equal opportunities to reach their full potential as adults. We specifically look for companies that offer high-quality educational products and services or that contribute to broadening the access to education.
There are different options to invest in education, both on public and private markets.
Listed equities
For Triodos Future Generations Fund, education is one of the thematic approaches to advancing child prosperity. This strategy invests in listed companies that provide educational services, especially for children. This includes (online) schooling, educational content and childcare.
Teachers are crucial to the quality of education through their interaction with children, but also through their selection of educational materials. That’s why we invest in Sanoma. This Finnish media and learning solutions company is one of the leaders in the European market for educational materials. Its learning segment offers learning solutions for primary, secondary, and vocational education (K-12), including books, online learning and teaching platforms, school management systems and distribution of learning materials.
UN Sustainable Development Goals
Regarding education and related activities, our investments – both through listed equities and private debt and equity – are aligned with SDG 4: Quality Education. This goal is a commitment to “ensure inclusive and equitable quality education and promote lifelong learning opportunities for all.” It is a pivotal driver for positive change, emphasizing the transformative power of education in fostering a sustainable and equitable world.
Remote learning is not a remote option anymore
Many things have changed since the 19th century, but the pandemic has been the most recent major catalyst for changes in society. Children found out that their parents, when working from home, are talking to a laptop for almost the entire day. Parents found out that, while it’s hard to combine working with parenting and teaching, remote education offers a solution. For many children classroom-based learning is still the best solution, but for a growing group of others remote continues to be a very good alternative.
One of the companies benefitting from this development was Stride, which has been in the portfolio of Triodos Future Generations Fund since its launch in 2022. Stride is one of the largest providers of virtual K-12 education in the US. When the pandemic hit, the company’s enrollment of students grew very strongly. Many people expected enrollment to start declining once the pandemic was over, but so far this hasn’t happened. In fact, the company’s enrollment is currently above the peak achieved during the pandemic, which seems to confirm that remote learning is here to stay. As a result, the stock has been one of the best performers in the fund since its inception.
Often enough, remote learning is sometimes the only option available. In a country like Côte d’Ivoire, for example, many children live far removed from school and therefore do not attend. In cooperation with the government, UNICEF runs a distant learning project, making educational programs available online. As only a minority of children have access to internet at home, UNICEF (with the help of local entrepreneurs) is also developing a solution that can bring solar-powered tablets loaded with study materials to children. So far, this initiative has been accessed nearly four million times.
Building schools from plastic waste
Triodos Future Generations Fund supports UNICEF’s innovative Plastic Brick Project in Côte d’Ivoire, donating the equivalent of 0.10% of the fund’s NAV each year. This ground-breaking initiative transforms plastic waste into durable building blocks, which are then used to construct schools, providing local children with access to quality education.
The impact of this revolutionary concept is profound. It not only facilitates the construction of schools equipped with clean water and sanitation but also empowers women, promotes the reuse of plastic waste, and enhances the quality of education.
Neither UNICEF, nor its partner in Luxembourg, Comité luxembourgeois pour l’UNICEF, is acting as an investment adviser and neither of them has had or will have any role in the design, structuring, development, management or operation of the Triodos Future Generations Fund. UNICEF, and the Comité luxembourgeois pour l’UNICEF, have not been and will not be involved in the management of the Triodos Future Generations Fund, including its investments decisions. Neither UNICEF nor the Comité luxembourgeois pour l’UNICEF has endorsed Triodos IM, Triodos SICAV I, the Triodos Future Generations Fund or any investment by the Fund. UNICEF and the Comité luxembourgeois pour l’UNICEF make no recommendation as to investment in the the Triodos Future Generations Fund. The sole role of UNICEF, and the Comité luxembourgeois pour l’UNICEF, is to receive the donation from Triodos IM and apply such donation to UNICEF’s programmes for children. UNICEF and the Comité luxembourgeois pour l’UNICEF will have no liability to the Triodos Future Generations Fund or investors in the Fund in relation to investments in the Fund, the performance of the Fund or otherwise in connection with the Fund. UNICEF is immune under international law from every form of legal process.
Generative AI in education
Another important trend is the rise of generative AI. It is fair to say that AI offers infinite possibilities in education. To name but a view: It enables personalised learning and tutoring, but also workload reduction for teachers. While it certainly has potential use and benefits in education, it also comes with risks. For example, it makes it much harder to teach analysis, critical thinking and so on. Another risk is that generative AI could enable unequal access to education, if personalised learning becomes too expensive. Education could then stop to be the great equalizer. We agree with UNESCO that generative AI can only be integrated into education with public engagement, and the necessary safeguards and regulations from governments. But businesses should also make sure that they use AI in a responsible way. And lastly, financial institutions have a crucial role to play in shaping the responsible development and use of AI technology.
A company that stands to benefit from the generative AI developments is PowerSchool. This company provides software for K-12 educational institutions. Its software solution supports various workflows within the K-12 software ecosystem, including both back-office and classroom workflows. This makes the software mission critical. One of the key strengths of PowerSchool is its ability to deliver more personalised education, a capability that has been significantly enhanced by the emergence of generative AI. Private equity investors recognised this opportunity and offered to acquire the company. The acquisition was finalised on the 1st of October. PowerSchool has therefore been a very successful investment for Triodos Future Generations Fund.
Private markets
Education is also a theme within our Financial Inclusion strategy, which provides private debt and equity to financial institutions in developing and emerging countries. Several of these institutions, in turn, finance educational facilities or provide student loans, thus contributing to broadening the availability and accessibility of education.
A good example of such an enabler is Varthana Finance. In India, many children, especially from low-income families, lack access to affordable quality education. Varthana Finance aims to overcome this gap by providing short and long-term financing to more than 3,500 affordable private schools. These education institutions enroll children from low-income and lower middle-income households, thereby impacting the lives of an estimated 2.5 million children.
Another example is Laudex. This Mexican financial institution provides education loans to students mostly from low- and middle-income backgrounds who wish to enroll for an (under)graduate study but must do so at a more expensive private university. Access to higher education, such as universities, is limited in Mexico due to insufficient government infrastructure to accommodate all potential students.
Doing your homework pays off
Investing in education—whether through public or private markets—offers a unique opportunity to drive positive impact while achieving attractive returns. Investors should be aware, however, that companies in the education value chain differ quite a bit. As a result, some businesses are inherently more attractive than others, from a financial perspective, but especially from an impact perspective. To maximise the benefits of investing in education, investors must do their homework. If they do, they’ll soon enough find out that here’s a promising sector with plenty of interesting investment opportunities. Join us in seizing them!
This is a marketing communication. Please refer to the prospectus and the Key Information Document of Triodos Future Generations Fund before making any final investment decisions. An English summary of investor rights can be found here. The value of your investment can fluctuate because of the investment policy. Triodos Future Generations Fund is managed by Triodos Investment Management. Triodos Investment Management holds a license as alternative investment fund manager and UCITS manager and is under the supervision of the Autoriteit Financiële Markten and De Nederlandsche Bank in the Netherlands. Triodos Investment Management may decide to stop the marketing of its collective investment schemes in your country.
