Ignoring sustainable development will come at a price for investors

June 21, 2018

 

Investors can no longer afford to view sustainable investing as a nice-to-have afterthought, with sustainable economic growth having become the primary source of financial return. It is therefore crucial for all participants in the financial ecosystem (asset owners, asset managers and issuers) to play a proactive and coherent role in creating long-term sustainable outcomes for all stakeholders.

 

Ultimately, industry and government leaders have a responsibility to engage in precompetitive collaboration to address issues concerning the creation of a sustainable economy.

 

This is according to Khaya Gobodo, Managing Director of Old Mutual Investment Group, who, while speaking at the Batseta Winter Conference 2018 this week, said that there is enough evidence to suggest that, if addressed correctly, environmental, social and governance (ESG) investing can be a source of not only competitive advantage, but also of attractive investment returns.

 

“We are at a pivotal point in the search for sustainable solutions for South Africa and there is an increasing opportunity for capital allocators to partner with Government in driving these solutions,” said Gobodo.

 

“We have seen a call to action with the launch of the UN Sustainable Development Goals (SDGs) in 2015 that made it clear that the global community relies heavily on the private sector to solve some of the most urgent sustainability problems it is facing,” he added. “Both companies and institutional investors are being asked to contribute to the SDGs through their business activities and investment decisions.”

 

“In South Africa, the leading current thinking around sustainability for the country is what is currently in the National Development Plan, where there is considerable alignment with SDG.”

 

Gobodo believes that investors should be placing more emphasis on the social element of the ESG lens. “One of the most significant impediments to a truly sustainable economy is the unbridled inequality we experience in this country. This is why black economic empowerment and transformation are such pivotal conversations for us to have as South Africans.”

 

He added that beyond the transformation of the industry, driving increasing investment in social infrastructure will lead to the kind of change that positively affects the lives of ordinary South Africans.

 

Old Mutual Investment Group has invested some R12 billion in these kind of alternative assets, with the aim of addressing gaps in social infrastructure, affordable housing and quality education. Gobodo believes that an increased emphasis by asset owners, asset managers and issuers on the creation of long term sustainable outcomes for all stakeholders will drive further investment in these kind of impact assets.

 

“Historically, sustainable impact has only been measured for impact funds and has tended to focus on the number of jobs created, number of schools opened and the number of houses with access to electricity and sanitation. But should impact be limited to impact fu