Willis Towers Watson Asset Management Review

3 When viewed through an ESG (environmental, social and governance) lens, what are the issues with such investments, as compared (for example) with investments in our own domestic markets?

Cavan Osborne, manager of the Old Mutual African Frontiers Fund at OLD MUTUAL INVESTMENT GROUP says the large ESG rating companies have very limited coverage of African companies outside of South Africa. So, ESG issues are generally left to the money manager teams to consider. Within ESG, governance is the most important. Our focus here is on determining if company the company is run for the benefit of the majority shareholder at the expense of minorities, for management’s benefit, the government’s benefit or for the benefit of all shareholders. Our experience suggests that just because the controlling shareholder is a multinational from outside of Africa doesn’t mean that minority shareholders get treated fairly.

Peter Leger, head of Global Frontier Markets at CORONATION FUND MANAGERS says ESG is a hugely relevant and multifaceted issue when investing in frontier markets. with the degree required.

“A second, growing school of thought believes that these are such nascent businesses that are so early in their lifecycle that our responsibility is one where we can still invest but then work very closely with those businesses. In many cases, these companies do not make active ESG oversights, but simply do things without knowledge of best practice.

“There is an education process which is required. This can come from responsible investors who partner with these businesses and there is a real benefit to clients in this approach. If a company has a significant ESG discount and addresses it over a few years, investors can benefit from the rerating that often occurs,” says Leger.