2 years ago

Blue Chip Issue 81

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Blue Chip is a quarterly journal for the financial planning industry and is the official publication of the Financial Planning Institute of Southern Africa NPC (FPI), effective from the January 2020 edition. Blue Chip publishes contributions from FPI and other leading industry figures, covering all aspects of the financial planning industry. Blue Chip takes this opportunity to wish the FPI a happy 40th anniversary. Congratulations!


FOREX RESPONSIBLE CONTROL INVESTMENT What are the Sustainable Development Goals? These days you can barely attend an investment conference or listen to an asset manager without hearing about ESG and a new acronym, SDG, or Sustainable Development Goals. In September 2016, the United Nations developed 17 sustainable goals with 169 targets to address the challenges of promoting sustainable development around the world. An approach was sought to align and assist organisations across the government and private sector to embed sustainability in their value chains. The SDGs are a call for worldwide action by government, business and civil society to end poverty, protect the planet and ensure prosperity for all. The 17 goals are set out in the diagram below: Business has a vital role to play in addressing the sustainable development challenges, and to balance the challenge of reducing negative impacts while still enhancing shareholder value to the benefit of all stakeholders. Over the last few years, business leaders (along with the wider investment community, regulators and other stakeholders) have been faced by more of the negative consequences of industrialisation. Think about climate change, and the interconnectedness of the global community, as seen by the current global Covid-19 pandemic and the recent worldwide disruption to supply chains when the container ship Ever Given was stuck in the Suez Canal. The need for more balance in sustainable development around the world is clear. At Momentum Investments, as part of the broader Momentum Metropolitan Group, we support the SDGs. We focus on the goals that align well with our business. These are: • Goal 3 - Ensure healthy lives and promote well-being for all at all ages • Goal 4 - Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all • Goal 7 - Ensure access to affordable, reliable, sustainable and modern energy for all • Goal 8 - Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all • Goal 9 - Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation • Goal 13 - Take urgent action to combat climate change and its impacts In considering how we approach our infrastructure development programme and impact funds, these SDGs were a key consideration in defining how we wanted to step up to the infrastructure opportunity set. One of the realities that has come to the fore is considering the social dimension and impacts of the projects that we undertake. As a real-world example, our increasing support for renewable energy projects and the ultimate aspiration of reducing the South African economic reliance on coal crucially needs to recognise the social dimension of such a transition. In forming part of this transition, we need to engage with various stakeholders to ensure the social implications in the workplace and wider community are managed responsibly. This is the basis of our support for a “Just Transition”. As investors, we can make an important contribution as allocators of capital to consider that the transition produces inclusive and sustainable development. At Momentum Investments, we have extensive experience in investing in alternative and unlisted asset classes. Having a strong and well-capitalised balance sheet allows us to take a long-term view on unlisted assets to the benefit of our investors. When combined with our integrated approach to responsible investing, we create differentiated portfolios with a unique and compelling value proposition. Mike Adsetts, Deputy Chief Investment Officer, Momentum Investments To find out more visit our responsible investing page at or watch our roundtable where we discussed how we make responsible investing real: Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider (FSP 6406).

My take on responsible investing RESPONSIBLE INVESTMENT Responsible investing is a much-talked-about topic in the investment industry right now, globally and locally. It is important to not just follow the hype around responsible investing but also understand the merits ingrained in this approach when it comes to investment philosophies and the construction of portfolios. Responsible investing for us is thinking beyond traditional financial gains but also considering the effect on society and the environment. The history of responsible investing Responsible investing originated from a religious perspective in the 1920s when some investors placed restrictions on investing in alcohol and tobacco. From these early roots, it has evolved in numerous ways taking into account the priorities of the time. More accountabilities drove a focus on governance, and climate science has pushed climate change to the fore. With this rich history, my firm view is that responsible investing is here to stay. Today, consumers want a greater level of insight into their investments. They ask about the real-world impact their investments have. Millennials, for example, think very differently about investment management. They have social media, apps and news at their fingertips, making them more informed about the relevance of investing and its effect on the world. However, in a world of sceptics and “window dressers” (we call them “green washers”), responsible investing can get a bad reputation. “Green washers” are those who negatively implement the principles for responsible investing. Here are some examples to illustrate experience1: • In 2019, British Petroleum (BP) was accused of publishing misleading advertisements about its low-carbon energy products when more than 96% of its annual spend was on oil and gas. • In 2018, Starbucks released a straw-less lid as part of its sustainability drive. However, with this lid, there was more plastic in the system than before. The lesson here is that consumers must ask for transparency and have an active interest in understanding where their money is going. There are numerous codes and regulations pushing this agenda forward that we need to uphold as an industry. We have been signatories to the United Nations Principles of Responsible Investing (UN PRI) since 2006. This institution is a global driver of integrating responsible investment practices into investment decision making. There is also ample evidence of the benefits of responsible investing. A study by Morgan Stanley showed that, in an analysis of 3 000 US exchange-traded funds and mutual funds, the funds managed using environmental, social and governance (ESG) principles considerably outperformed their traditional counterparts. ESG investing outperforming the markets An analysis of more than 3 000 US mutual funds and exchange-traded funds shows that sustainable equity funds outperformed their traditional peer funds by a median total return of 4.3 percentage points in 2020. During the same period, sustainable taxable bond funds outperformed their non-ESG counterparts by a median total return of 0.9 percentage points. Source: Sustainable funds outperform peers in 2020 during Coronavirus (24 February 2021) In a world where people are grappling with the after-effects of Covid-19, the interconnectedness of all of us has also driven growth in interest in responsible investing. There is a growing cohort of investors who want to make meaningful investments with real impact for the future. For me, responsible investing is not charity but a real opportunity we face daily to deliver investment returns in a way that actively incorporates ESG principles. Our portfolios take on the challenge of using capital to improve our environment and the people who live in it. This strategy brings us closer to the average person, as it informs them how it can benefit them and their community. That’s how we make it personal because investing is personal. At Momentum Investments, sustainable and responsible investment practices are a material factor underpinning our long-term success, as well as the success of our clients. To find out more visit our responsible investing page at momentum/invest-and-save/ responsible-investing Sonja Saunderson, Chief Investment Officer, Momentum Investments 1Source: 10 Companies and Corporations Called Out For Greenwashing (2 August 2021) Momentum Investments is part of Momentum Metropolitan Life Limited, an authorised financial services and registered credit provider (FSP 6406).

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