Good returns need not exclude socially responsible investment
• The responsibility to improve lives over the long term goes beyond financial growth of assets
As an asset manager, being entrusted with our clients’ capital means “business as usual” is simply not an option. From our understanding of the growing sustainability trend and its potential to affect the competitive landscape across sectors, the industry should be committing itself to responsible investment in order to, first, meet our investment mandate, and, second, contribute positively to our shared future.
This commitment has to be actively realised at the asset owner, asset manager and investee company levels.
Many investors have an intuitive understanding of sustainability and a genuine interest in contributing to a better tomorrow.
Those who have their savings invested with our business depend on us to improve their lives over the long term.
This responsibility, we believe, goes beyond merely investment returns.
Being part of greater society also means that asset owners are as concerned about socioeconomic difficulties as everyone else. If given the option to gain investment returns and positively affect our world, who would object?
However, few investors have a working definition, let alone a fully integrated sustainable investment strategy.
And many still believe that responsible investment means that, to some extent, one has to compromise on the investment’s performance.
In truth, comprehensive research (based on more than 2,000 studies over the past four decades) shows that sustainable investing is uncorrelated with low returns.
This means that by investing responsibly, we can sustainably grow our returns over the long term and also help build a better future for all.
Our specific responsible investment approach aims to deliver appropriate risk-adjusted returns for our clients while improving people’s lives. Through our investment expertise, these goals need not be mutually exclusive.
Given our fiduciary duty as an asset manager, we know that we need to understand and consider all risks when allocating capital on behalf of our clients.
That is why we have adopted a cross-cutting approach that integrates material environmental, social and governance (ESG) issues into our investment and ownership decisionmaking processes across all of the asset classes and the investment styles.
To meet client needs, it’s imperative to have a clear commitment to driving an engagement approach that ensures that the assets we invest in meet their long-term performance goals in a sustainable manner.
It’s increasingly difficult to separate ESG factors from business performance.
As a result we actively look to invest in companies that invest in the future.
Our experience shows us that material ESG issues directly affect the ability of firms to generate long-term value for all stakeholders. This view is backed up by industry and academic studies — notably research from Harvard Business School, which shows that “companies that operate with a true long-term mind-set have consistently outperformed their industry peers since 2001, across almost every financial measure that matters”.
It is the businesses that plan and operate with the future in mind that will meet their performance objectives in the long run.
Our business wants to contribute to a legacy of responsible business practices that make a difference for all stakeholders, including both investors and investees. One of the ways we are working towards this is through regular engagement with listed companies on a range of ESG concerns.
As much as SA has reason to celebrate its diversity and democracy, wealth inequality poses a challenge to society’s cohesion; fiscal and social sustainability are intertwined.
And though many obstacles are rooted in the legacy of exclusion, we must face the fact that SA has been consistently outperformed by Brazil, Russia, India and China (the other Brics countries) and Sub-Saharan African countries since the start of its democracy.
Positive outcomes should not only be measured in rands and cents. Our communities require asset owners and allocators that appreciate their potential to create a wider impact: from improving access to education and generating much-needed jobs to driving transformation and greater economic inclusion in the communities in which they live and work.
By having a responsible investment commitment and truly implementing it throughout our investment processes, we can help ensure broader economic stability for SA.
World Bank estimates suggest that a one percentage point increase in economic growth can lift at least 170,000 South Africans out of poverty (using the upper poverty line).
That is why responsible investment is so critical — to fuel growth, productivity and competitiveness and, ultimately, combat inequality.
“Sustainability” should not be a trendy word for now but a vital reality for the long term.
Managing assets and delivering investment performance need to align with creating longterm enduring value through an approach that is also beneficial to the generations of the future.
This is not an easy feat. We are still challenged as we realise this within our own business, but we passionately believe responsible investment is an aspirational goal that we should all strive towards.
We all need to grasp that the future is a present priority.
COMPREHENSIVE RESEARCH SHOWS THAT SUSTAINABLE INVESTING IS UNCORRELATED WITH LOW RETURNS