Teboho Makhabane, Head of ESG and Impact at Sanlam Investments
Immediate benefit for South Africans in need at the core of sustainable and impact investing
Allocators of capital who are innovative and intentional in their sustainable and impact investing can deliver much-needed benefits for people, communities, and the planet by focusing on inclusivity, legacy and society.
In a Critical Conversations webinar, broadcast on 8 November 2023, a panel of experts from Sanlam Investments described what impact and sustainability meant to them, to the business and to the country.
“Impact investing is about making a real, sustainable difference that will last beyond your lifetime and generation, leaving the world a better place than you found it, to the benefit of your children and ensuing generations,” said Pawan Singh, Portfolio Manager: Sustainable Infrastructure Fund at Sanlam Investments.
Legacy is built by steering capital towards projects that create lasting benefits for communities. “The impact we intend to make must be felt by the end-beneficiary, whether that means they can access a good or service they could not access before or end up with a decent job, the benefit must be tangible,” said Teboho Makhabane, Head: ESG and Impact at Sanlam Investments. .
In the impact and sustainability worlds, inclusivity is about upliftment. “Impact investing is about providing access to opportunities for people who have previously been excluded, and ensuring that people have an even playing field to improve their lives, especially in the context of our country’s history,” said Vukile Themba-Mketo, Senior Portfolio Manager: Private Debt at Sanlam Investments
Much of the country’s future success hinges on tackling the rising unemployment trend by creating decent jobs that deliver tangible benefits for society. Dr Gift Pule, Principal: Private Equity at Sanlam Investments noted: “Through employment, impact can filter into the community and the broader ecosystems of investee companies; the ripple effect that comes from decent work reverberates in each household through individual experiences of positive impact.”
Impact investing gains momentum through incorporating ethics, ethos, and values into investment decision-making. According to Dr Pule, allocators of capital must consider the impact of these decisions through “wearing the lens of the community; company or individual employee”. For example, impact is different at a Fintech business in Sandton versus a large meat-packing plant in Cullinan.
The Critical Conversations discussion posed tough questions around the evolution of ESG, sustainable and impact investing, given that the so-called triple bottom line (economy, environment and society) methodology had been around for decades. “Yes, the triple bottom line concept existed but we were never intentional about it; impact investing ups the ante by requiring us to pursue social as well as financial returns from the start of any project,” Makhabane said.
The 17 United Nations Sustainable Development Goals (UNSDGs) – which offer an excellent overview of potential environmental and social focuses – cannot be achieved without innovative funding. Success, therefore, demands an intentional approach from private sector allocators of capital, assisted by development funders and government.
When asked why business should step in to fund government’s social obligations, the panel reminded South Africa that the private sector does not exist in isolation. “Business is impacted by social issues like high unemployment; if households are not earning, they lapse their insurance premiums and have no money to contribute to pension funds … a constrained economy without jobs means that products and services will not be consumed,” Makhabane said.
Singh commented that portfolio managers had to incorporate the impact investing lens at the early stages and as a critical component of the investment process. “Investment philosophy is critical, and we are very methodical in defining what we mean by impact, and which of the environmental and social outcomes are important to us, whether it is climate mitigation; digital inclusion; energy security; transport and logistics or job creation,” he said, adding that measurable impact must be elevated alongside commercial returns.
“We fund predominantly into economic infrastructure; but investments into ports, rails, solar and wind farms and digital infrastructure creates a lot of social impact,” Singh said. He gave the example of a potential transaction in the Sustainable Infrastructure Fund into providing high-speed fibre internet into township economies, which would lead to significant digital inclusion, with additional social ‘yield’ in areas like education and jobs in the local communities.
More than two thirds of the Critical Conversations audience singled out sustainable investing as ‘most aligned’ with their personal values, with impact investing (20%) and ESG investing (10%) lagging slightly. It is apt then, that the Sanlam Investment Group CEO, Carl Roothman, introduces the group’s Responsible Investing Report 2023 with the words: “By integrating sustainability practices into our investments, we strive to address some of the most pressing issues of our time and contribute to positive change in our society”.
49% of the Critical Conversations audience said job creation was the most impactful focus area for South Africa, recognising the knock-on impact of high employment across all spheres of an economy. Education and infrastructure development were second and third in the polling. The good news is that jobs – and more specifically decent jobs – are a spin-off of most impact investing activities.
Makhabane encouraged South Africans to be part of the solution, and to be innovative in how they invest, while Themba-Mketo pointed out that there is an interconnectedness between all stakeholders in society, and that each has a role to play, encouraging everyone to “lean into” that role. And Dr Pule, said “sustainability cannot live in strategy documents and frameworks; we all need to have some level of individual accountability and drive it within our own ecosystems.” Singh closed with a proverb: “We do not inherit the earth from our ancestors, we borrow it from our children.”