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Despite challenges, South Africa offers a unique opportunity for creating change with socially responsible investing

Despite challenges, South Africa offers a unique opportunity for creating change with socially responsible investing
| Inside Institutional, Sustainable Investing

While multiple challenges exist in South Africa, the country remains well-placed for socially responsible investing towards sustainable growth and impactful change, writes Teboho Makhabane, Head of ESG and Impact at Sanlam Investments.

South Africa has made significant progress in the past 30 years of democracy – yet the nation still grapples with pressing challenges. The economy is strained, exacerbated by rising unemployment and inequality, and the devastating impacts of climate-related disasters, which have substantial social consequences.

In the face of these complexities, maintaining a strong social fabric is crucial for rebuilding and advancing our country. Socially responsible investing, guided by South Africa’s National Development Goals and the ESG-focused considerations in Regulation 28, emerges not as a silver bullet, but as a key strategy for tackling these socio-economic challenges. By developing innovative products that enhance sustainability while appealing to investors, the financial sector can drive real change.

The roots of sustainable investment

While sustainable investment practices are not a new concept, they have gained significant momentum in recent years. Responsible investing became a more formalised strategy in the 1960s, when investors began to question the ethical implications of their investments. It was significantly shaped by the formulation of the United Nations 2015 Sustainable Development Goals, which highlighted the private sector’s part in overcoming the enormity of humanity’s shared challenges.

This transition was underscored by recognition of the interplay between global events – like climate change, the Covid-19 pandemic and widespread activism – as well as global economic growth, and the important role that the financial sector can play in channeling money to address these issues.

We need to pay attention, and take action, today

Today the emphasis is not just on avoiding harm. It is on proactively doing good. South Africa is a prime ‘candidate’ for proactive responsible investing strategies to reap robust social and financial returns. Bowman’s in depth exploration has identified several compelling reasons, summarised below.

  1. Regulation 28: In the US, pensions are invested solely to earn financial return. In South Africa, Regulation 28 of the Pension Funds Act requires all South African pension funds to appraise assets for their ESG integration before they are considered for investment. South Africa recognises responsible investing as key to common law fiduciary duty. Recent revisions to Regulation 28 encourage local investment by pension funds, particularly in infrastructure, which aligns with fostering economic development.
  2. The NDCs: The updated Nationally Determined Contributions (NDCs) of South Africa under the Paris Agreement, released in 2021, aim to reduce greenhouse gas emissions more aggressively than previous targets and emphasise South Africa’s commitment to transitioning to a low-carbon economy.
  3. Socio-economic opportunity: South Africa’s socio-economic situation presents ample opportunities for robust financial – and social – returns, with pipelines of infrastructure and enterprise development, for example. The proliferation of impact- and sustainability-oriented products presents major possibilities for investors to earn strong returns, backed by institutional investors and the government.

Looking ahead

Conditions are ripe for responsible investment to grow in South Africa. Asset managers have a pivotal role to play in reassuring investors of the opportunity and effectiveness of responsible investing in the South African economy. As renewable energy and SMME investments become more commonplace, constant innovation is needed to address broader sustainability issues through creative fund structures. Blended finance is a critical strategic consideration, facilitating a collaborative approach towards tackling complex shared challenges. This approach not only helps to mitigate risks but also leverages collective expertise and resources, enhancing the potential for impactful outcomes.

 *Sanlam Investments’ Sustainable Infrastructure Fund has delivered consistently robust returns while helping to build tangible solutions for generations to come. The group’s SME Debt Fund is dedicated to job generation as well as strong financial returns, while our longstanding partnership with Climate Fund Managers has created 8 000 jobs and given over a million people improved access to renewable energy.

 

 

Disclaimer

Sanlam Investments consists of the following authorised Financial Services Providers: Sanlam Investment Management (Pty) Ltd (“SIM”), Sanlam Multi Manager International (Pty) Ltd (“SMMI”), Satrix Managers (RF) (Pty) Ltd, Graviton Wealth Management (Pty) Ltd (“GWM”), Graviton Financial Partners (Pty) Ltd (“GFP”), Satrix Investments (Pty) Ltd, Amplify Investment Partners (Pty) Ltd (“Amplify”), Sanlam Africa Real Estate Advisor Pty Ltd (“SAREA”), Simeka Wealth (Pty) Ltd and Absa Alternative Asset Management (Pty) Ltd (“AAM”); and has the following approved Management Companies under the Collective Investment Schemes Control Act: Sanlam Collective Investments (RF) (Pty) Ltd (“SCI”), Satrix Managers (RF) (Pty) Ltd (“Satrix”) and Absa Fund Managers (RF) (Pty) Ltd. Sanlam is a full member of ASISA. Please note that past performances are not necessarily an accurate determination of future performances, and that the value of investments/collective investment units/unit trusts may go down as well as up.

The information in this article does not constitute financial advice.  While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSP, their shareholders, subsidiaries, clients, agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaims all liability for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information.

 

 

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Sanlam Investments consists of the following authorised Financial Services Providers: Sanlam Investment Management (Pty) Ltd (“SIM”), Sanlam Multi Manager International (Pty) Ltd (“SMMI”), Satrix Managers (RF) (Pty) Ltd, Graviton Wealth Management (Pty) Ltd (“GWM”), Graviton Financial Partners (Pty) Ltd (“GFP”), Satrix Investments (Pty) Ltd, Amplify Investment Partners (Pty) Ltd, Sanlam Capital Markets (Pty) Ltd (“SCM”), Sanlam Credit Fund Advisor Proprietary Limited, Sanlam Africa Real Estate Advisor Proprietary Limited and Sanlam Employee Benefits (“SEB”), a division of Sanlam Life Insurance Limited and Simeka Wealth (Pty) Ltd; and has the following approved Management Companies under the Collective Investment Schemes Control Act: Sanlam Collective Investments (RF) (Pty) Ltd (“SCI”) and Satrix Managers (RF) (Pty) Ltd (“Satrix”).

The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium- to long-term investments. Please note that past performances are not necessarily an accurate determination of future performances, and that the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available from the Managers, Sanlam Collective Investments (RF) Pty Ltd & Satrix Managers (RF) (Pty) Ltd, a registered and approved Managers in Collective Investment Schemes in Securities. Additional information of the proposed investment, including brochures, application forms and annual or quarterly reports, can be obtained from the Manager, free of charge. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in the portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of the portfolio and the investor will differ depending on the initial fees applicable, the actual investment date, and the date of reinvestment of income as well as dividend withholding tax. Forward pricing is used. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The performance of the portfolio depends on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date. Lump sum investment performances are quoted. The portfolio may invest in other unit trust portfolios which levy their own fees, and may result is a higher fee structure for our portfolio. All the portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No 45 of 2002 (“CISCA”). The fund may from time to time invest in foreign instruments which could be accompanied by additional risks as well as potential limitations on the availability of market information. The Manager has the right to close any portfolios to new investors to manage them more efficiently in accordance with their mandates. The portfolio management of all the portfolios is outsourced to financial services providers authorized in terms of the Financial Advisory and Intermediary Services Act, 2002. Standard Bank of South Africa Ltd is the appointed trustee of the Sanlam Collective Investments Scheme & Standard Chartered Bank is the appointed trustee of the Satrix Managers Scheme.