Making a positive difference to our greening future should be a key driver. A focus on environmental, social and governance (ESG) factors to help inform decision-making is vitally important. Impact investing should be a tangible goal that delivers on these ESG goals.
The challenge, however, is a tendency by some organisations to ‘greenwash’ – defined as conveying a false impression or providing misleading information regarding the environmental impacts of an investment.
Another challenge is the lack of a standardised system to collectively report on ESG implementation and impact. In response, the Johannesburg Stock Exchange recently published its Sustainability and Climate Disclosure Guidance that aims to promote transparency and good governance, and guide listed companies on best practice.
A recent Financial Mail Green Economy Digital Dialogues in partnership with RisCura, Mergence Investment Managers, Nedgroup Investments and Standard Chartered put the spotlight on the transparency of impact investing.
Kasief Isaacs, senior investment principal at Mergence Investment Managers, has a specific focus on energy, infrastructure and impact investments at Mergence where he leads the private markets investment team. Mergence, he explained, balances the need for financial returns with impact with ESG deeply embedded in its investment practice. Where possible, the business deploys capital to solve societal challenges such as providing affordable housing. Its investments prioritise particular objectives and, where possible, dovetail and align with government’s National Development Plan.
Nedgroup Investments focuses on four key sustainability areas including climate change, biodiversity loss, human rights, and diversity and inclusion. David Levinson, head of responsible investing at Nedgroup Investments, is spearheading the business’ drive to become a leader in responsible investing. Investors need to look for money managers who invest in projects that align with their own values, said Levinson. In the South African context it’s not always practical to exclude certain stocks and there is sometimes value in putting pressure on companies to hold investee companies up to a higher standard. The challenge in the pension fund industry is that it’s often very difficult to measure impact in listed companies.
The biggest investment theme continues to be ESG, said Glenn Silverman, investment strategist director at RisCura. He said it’s important to distinguish between the concept of ESG – which is not a bubble and is here to stay – and the hot flow of money to particular investments. There are two key aspects to impact investments: there needs to be intentionality around them and secondly, they must be measurable, he revealed.
Neither government nor the private sector alone can solve SA’s problems, said Silverman, adding that government’s responsibility is to create an enabling environment.
Michelle Swanepoel, head of Securities Services at Standard Chartered, is an expert in the post trade industry in Africa. Given an inadequate regulatory and legal framework, she said the post trade environment has a unique role to play when it comes to monitoring impact investments, driving social inclusion, promoting shareholder participation and playing a role in market advocacy. When it comes to monitoring impact investments, the big question is who exactly is the right party to assess claims of greenwashing and to ensure that investments don’t have unintended consequences.