Why the implementation of ESG policies is top of mind for asset investors
Standard Bank presents Investing in the Future: Acting Now and Acting Well - a podcast series dedicated to unpacking the current state of ESG in South Africa. 702’s Arabile Gumede hosts expert guests to discuss the shifts needed to make a fundamental change that can achieve a resilient and regenerative economy.
In this episode, Fatima Vawda, Managing Director of 27four Investment Managers discusses the importance of ESG from an investor's perspective, and how vital it is that your assets are responsibly invested.
Click below to listen to the conversation while you read:
Environmental, Social and Governance (ESG) is described as an evaluation of a company's conscientiousness for social and environmental factors. The implementation of ESG practices has therefore become essential for the future growth and sustainability of South African businesses, as well as the positive impact a business has on society at large.
The same applies to your money and whether you invest it responsibly. In essence, how your money is invested today will ultimately determine the quality of your future.
Responsible investing has become a fundamental priority for the global industry, says Fatima Vawda.
ESG is a number one priority for investors domestically and globally... If you are an asset manager, and you do not integrate ESG into your evaluation process of underlying assets, you will not get a seat at the table.Fatima Vawda, Managing Director at 27four Investment Managers
From a South African perspective, where and how you invest your assets is paramount, given the uncertain financial state the country finds itself in at the moment.
The country is grappling with large scale corruption, rolling blackouts and political unpredictability – factors that could have an impact on your investments.
The regulator from the pension funds perspective in South Africa has issued several regulatory objectives in terms of how retirement funds when they invest in any kind of underlying assets. They've got to take into consideration the long term sustainability of that asset.Fatima Vawda, Managing Director at 27four Investment Managers
It is an imperative and a prerogative for any asset manager investing on behalf of the consumer to take into consideration the integration of ESG.
South Africa has had the triple challenges of malfeasance, corruption and various issues relating to state-owned enterprises, as well as the private sector.
As the investment community, we invest in these underlying assets and we're at the stage where we're saying 'enough is enough'.
Vawda believes that we need to take into consideration future generations, we need to ensure that we protect the environment and the future of our children and our grandchildren.
Naturally, the following questions come to mind:
- What about the return on investment in ESG?
- What's in it for the investor?
- Do investors feel like they're getting enough bang for the buck?
It goes without saying that companies that are well managed and have good policies in respect of their labour force and women in particular, as well as the communities within which they operate are more than likely going to flourish financially, says Vawda.
There is a high correlation between achieving good sustainable long-term consistent investment returns, and a good, solid ESG framework.Fatima Vawda, Managing Director at 27four Investment Managers
Remaining ethical, ensuring the right corporate governance is in place and being more transparent in communications about what is happening in a business are the hallmarks of ESG but is this really what investors are looking for?
Implementing any new strategy will almost certainly come with its challenges and instilling a culture or attitude of ESG is no different.
So, what are the challenges with regards to implementing an ESG framework?
Simple issues like diversity, equity and inclusion need to be considered.
We have to consider the generation where we are and what millennials are looking for. We need to consider the 'E', the 'S' and the 'G' very separately. It's a lot easier to integrate governance issues but when you start thinking about the 'S' and the 'E', what we do find is that entities find it incredibly difficult, says Vawda.
People are talking about it now in the US because of 'Black Lives Matter' and wanting to create parity in the private and the public sector. We've been talking about it for 400 years, we've got the BBBEE codes, it's part of our constitution, it's part of our flag, it's part of our Bill of Rights. We're at different levels, but we still have these challenges.Fatima Vawda, Managing Director at 27four Investment Managers
ESG issues will differ from region to region, and company to company – the enactment of ESG policies should benefit investors but most importantly, society as a whole, she concludes.
It can't just be some of us moving towards this future, we have to be all in. For more information, visit Standard Bank Corporate and Investment Banking.