19 August 2020
Almost all of the pension and provident fund managers surveyed by Intellidex expect sustainable investment to become more important in their investment strategies over the next five years.
The research report, Investing for Impact, was commissioned and funded by Ashburton Investments. The report can be downloaded here.
The aim was to understand the extent of sustainable and impact investment practices and to determine the impact of a guidance note issued in 2019 by the Financial Sector Conduct Authority calling for greater disclosure on the “sustainability of investments and assets in the context of a retirement fund’s investment policy statement”.
Sustainable investing entails, among others, incorporating environmental, social and governance factors into investment decisions. More aggressive strategies can include thematic investing (eg, climate change) or impact-first strategies such as social entrepreneurship for employment creation.
Conducted between August and September last year, the research report, presented at a webinar launch today, incorporates the views of 47 pension and provident funds overseeing R2.6 trillion of assets representing about 65% of the industry’s AUM.
The research found that the FSCA guidance had a notable impact, with most funds reviewing their policies as a result of it. Interestingly, 53% of the funds (results weighted according to AUM) said they had already met or exceeded the guidance in the FSCA note.
Other key findings include:
- Transparency and measurement is the critical issue that constrains interest in greater sustainable investment by the funds.
- BEE is the most common sustainability strategy incorporated into investment policy statements.
- Relative to international practice, there is low use of negative screening (excluding investments in entities which have poor ESG performance).
- Respondents consider the social element of ESG to be the most important, followed by governance and then environment.
The most important issues in relation to environmental factors were listed as climate change, water use and renewable energy. For the social element, employment creation and economic inequity were the most prevalent issues, and for governance they were business ethics, bribery and corruption and executive remuneration.