Advancing financial inclusion around the world

The need for greater access to financial security is accelerating.

Worldwide financial insecurity represents one of the greatest challenges and opportunities of our time. Governments, along with business and financial sectors, have accomplished some progress towards greater financial security of individuals, communities, and societies, cutting global poverty rates by more than half in the first two decades of the 21st century.¹

Still, the need for financial security continues to accelerate amid macroeconomic, demographic, and environmental shifts, including:

• global aging population,
• growing wealth and income gap,
• large underrepresented and unbanked populations,
• changing work perspectives, and
• retirement savings gap.

The global pandemic and geopolitical conflicts only reiterate the lingering fragility of financial security around the world, hampering the ability of people to earn, protect themselves and their families, and plan for the future. And the need continues to grow for solutions and products to address these challenges.

Let these recent crises rally and refocus us. When so many are still fighting for economic survival, we can’t reap the full benefit of the progress and innovation we’ve collectively built over the centuries and around the globe.

Principal^® exists to foster greater access to financial security.

Guided by our core values, we stay true to our purpose—to help more people and businesses around the world gain access to education and resources that can help them make financial progress and become more financially secure.

We all benefit from increased access to financial security, though we understand that a global goal means vastly different things to different people. Defined here, financial security means the ability for a person to:

• confidently meet current and future financial obligations,
• access emergency savings and protection as needed,
• progress toward long-term financial goals, and
• make confident choices.

As such, we’re committed to expanding financial security access through long-term, responsible, and sustainable actions, and creating new opportunities for generations to come. Contingent upon markets with supportive conditions, we’re helping meet the financial needs of society both now and in the future in several ways, including:

• applying forward-thinking business practices to create innovative products and services to meet the diverse needs of customers across 80+ markets,
• utilizing our expertise in retirement, asset management, and insurance to provide education and insights to our 51 million customers,²
• integrating socially responsible investments across portfolios as a signatory of the Principles for Responsible Investment,³
• meeting people where they are on their financial journey, developing pathways to economic mobility and financial empowerment, and
• engaging governments to advocate for public policy solutions that improve access to financial services.

To drive greater progress toward our mission of global financial security, we’ve made the intentional decision to focus on the foundation-building work of financial inclusion. Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that help meet their needs—from savings, credit, and insurance to education and insights—and that these foundational tools and resources are delivered in a responsible and sustainable way.

Our focus on financial inclusion, which has been identified as an enabler for seven of the 17 United Nations Sustainable Development Goals,⁴ is an extension of our environmental, social, and governance (ESG) strategy. Equitable products that are convenient and accessible to more people, including those in underserved populations, are pivotal to the success of this mission. As a member of the U.N. Global Compact, we participate in the Sustainable Finance action group to work with other industry leaders as we rethink the future of finance as a catalyst for social impact.

We’ll make progress by examining the challenge.

A more vivid and accurate portrait of financial inclusion can illuminate the basic infrastructure of everyday life that shores up or strips away stability from our systems—in areas such as politics, health, food, ecology, or transportation. Yet, no global measure currently reports security in this way.

To achieve financial inclusion, a country must have a strong political commitment and coordination across public and private stakeholders to create an enabling environment and wide-reaching policies to promote responsible financial access, financial capability, innovative products and delivery mechanisms, and high-quality data to inform policymaking. All of this creates opportunity and a supportive environment to empower people to engineer their own long-term financial security.⁵

Deepening our commitment and informing our path forward, Principal commissioned the Global Financial Inclusion Index (the Index) to measure the degree to which people have access to useful and affordable financial products and services that meet their needs. Using a unique research methodology, the Index and associated analysis will help us better understand the key systems shaping financial inclusion (governments, employers, and financial services) in more than 40 markets to give a comprehensive, representative evaluation. To provide a more holistic view, we’re supplementing with global consumer research as an overlay to the Index.

Developed in collaboration with the Centre for Economics and Business Research (Cebr), a well-regarded, global economic research house, the annual Index will:

• evaluate the degree to which governments, employers, and financial systems promote financial inclusivity in more than 40 markets,
• measure financial inclusion on a market and sector basis, with a scoring system and associated analysis of both public and private data, and
• assess the barriers and opportunities to bring more people into journey to financial security.

The Index is a unique and insightful resource that can be used by various stakeholder groups, from policy, academia, and non-governmental organizations (NGOs) to businesses and the financial services industry. The full findings from the first annual Global Financial Inclusion Index will be released in Q3 2022 and will be made freely available to the public.

Like all strong goals, we’ll benchmark and measure our collective progress. And we’ll demonstrate how our differentiated business model and expertise provide value for the financial journeys of individuals and businesses. In this pursuit, we strive to shape a world where access to financial security is foundational.