However, this is currently an impossibility for emerging markets. “There is a USD2.5 trillion funding gap across the developing world to reach the goals, and Africa has a staggering 90% gap,” said Nersan Naidoo, CEO of Sanlam Investments, quoting the United Nations Conference on Trade and Development.
Naidoo was addressing the Investment Forum 2021 on the vital role sustainable investments will play in resetting our planet from profit-led to long-term prosperity and equality. He said Africa is the continent most vulnerable to climate change and the effects of the pillaging of the planet's natural resources. “We may see climate change less visibly than Iceland with its melting glaciers, but it will directly and devastatingly impact our continent, primarily through reduced food security as well as water shortages and myriad other factors. On a continent already desperately short of food in so many places, this is a terrifying thought. The plight of Africans will become far more extreme if we don't act quickly,” he said.
Naidoo added that if we can ever hope to do what is needed to save our continent, our planet and our people, I believe we will have to mobilise capital on a massive scale. We need to mobilise retail investors, pension funds, institutional investors, philanthropic organisations, commercial banks and life insurers to invest sustainably. This will catalyse companies to increase their focus on sustainable practices, which is ultimately when the real change will speed up.
Naidoo told financial advisers and the investment industry at the forum that, when considering whose responsibility it is to redirect capital, every person involved in the investment industry should answer ‘me’.
“We simply can't leave it to governments or big corporates only. Yes, they have massive roles to play. But each of us does too. If you are a financial adviser, it is about ensuring you work with a sustainability-focused asset manager. If you are an asset manager, it is about embedding sustainable investment practices at every level of the organisation and guiding clients to move their mandates in this direction.”
Naidoo said asset managers should no longer be content to report back purely on financial returns, and his firm is on an accelerated path to deliver impact-based reporting. “I can't stand in front of a client anymore and simply advise them that we've delivered inflation and +5% on their investment. I need to report on the impact that the investment is having. I need to say that for your R1 million investment, we have delivered a great return, but we have also meaningfully contributed to reducing carbon emissions by 50 million tonnes a year, creating 1,500 jobs and feeding 10,000 hungry people.
“When you start to see it through that lens, realising how much of a difference investing in the right places to protect the planet and its people can make, everything changes. For me, using our investment capabilities for good has become my professional and personal purpose. It is driving me on a daily basis and is becoming embedded in every level of what we do at Sanlam Investments,” said Naidoo.
To fast-track its sustainable investment capabilities and fulfil this purpose, Sanlam Investments partnered with Robeco, a company that has been investing sustainably for more than 20 years.
Malick Badjie, Head of Africa at Robeco, said sustainable investing is now a multitrillion US dollar industry that has become mainstream, with more people committing to it every day. “It’s no longer a peripheral investment strategy. It is the fastest growing segment in the investment industry and is delivering strong returns while saving the world. There is a total of USD23 trillion managed under responsible strategies. While Europe still accounts for 52%, 30% is now from the US, and other areas are picking up too, including South Africa.
“Strong, sustainable practices in companies are a sign of strong governance and management as well as long-term thinking. All of these practices equate to solid companies that are in touch with our world today and into the future – which means that these companies are the ones leading the way in their respective industries. Ultimately, we see sustainability driving company success, which results in a strong performance,” said Badjie.
Badjie concluded that the future of humanity and all life on earth depends on us, “A huge responsibility, but one that collectively, I believe, we can achieve.”
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