HOW DO OUR CORE BELIEFS ALIGN?

While the world has been irreparably changed by Covid-19, our beliefs and values as a business stay the same. Yes, we have embraced the change brought about by our ‘new normal’, however we have also remained true to who we are and what we do as a responsible investment business. We believe that it is in the interests of all participants in the financial ecosystem, to play a proactive role in creating long-term sustainable outcomes for all stakeholders. As investment managers and the stewards of our customers’ capital, our approach to Responsible Investment (RI) is founded on the understanding that sustainability issues can and do influence long-term investment outcomes. Issues such as resource depletion, climate change, poor governance and social inequality, pose both investment and systemic risks to our customers’ goals. 

As investment specialists, we believe that it is the material ESG factors that affect long-term outcomes. Therefore, fundamental alignment on long-term sustainability and the broader interests of society, creates a virtuous circle among customers, custodians and the firms in which we invest. Our approach to RI is further informed by the long-term nature of many of our investments, and our size and ability to influence RI practices – not only in financial services, but across industry through leadership and stewardship. 

ARE WE MAKING INROADS?

2019 was another landmark year for RI in South Africa – notable milestones include the growing number of collaborative engagements by asset managers on ESG issues, the publication of the Financial Sector Conduct Authority (FSCA)’s sustainability guidelines and growing pressure from civil society for the investment community to act on climate issues. Additionally, during 2019, we saw growing demand from both institutional and retail investors for products that align with sustainability outcomes. 

As a business, we remain focused on our two RI priority areas: 

1. Deepening our ESG research and integration practices 
2. Focusing our capabilities on investment solutions that address long-term sustainability issues (e.g. renewable energy, education and agriculture). 

For our business, the core areas of progress have become increasingly evident:

• ESG data in listed equity 

Through 2019, we continued to build out the strength and quality of our proprietary ESG data signal. We leverage this signal to track ESG issues as they arise in the listed markets and to guide the focus of our fundamental equity research. Additionally, we initiated the process of testing this ESG signal in various strategies with the view to developing a low carbon-high conviction ESG product suite. 

• Listed equity stewardship 

Our Listed Equity Stewardship programme cuts across some R300 billion of client holdings and provides an important platform to champion for change on key ESG issues. During 2019, we again communicated with the market setting out our clear expectation for the businesses we invest in regarding ethical leadership, tackling transformation and integrating ESG issues into their long-term business strategy. We worked proactively with the management teams of our key holdings on high-risk ESG issues and undertook engagements at 31 companies on 93 ESG issues. During 2019, we stepped up collaboration across the industry and tabled a Just Transition resolution at the Sasol AGM with five other asset managers. Additionally, we launched our Listed Equity Stewardship service to a select group of third-party clients. The service targets large pension funds who are seeking a professionally delivered and consistent stewardship outcome across their holdings. We see this service as an opportunity to build a coalition of investors who have a shared interest in long-term sustainability outcomes. 

• Strengthening our policy on RI 

Our RI policy was first published in 2012 and has been reviewed on an annual basis. In 2019, we went through a process of renewing and ensuring alignment with the Code for Responsible Investing in South Africa (CRISA), Regulation 28 of the Pension Funds Act, the Financial Sector Charter (FSC), the King IV Code on Corporate Governance (Principle 17), and the United Nations backed Principles for Responsible Investment (UNPRI). 

• Participating in industry initiatives 

We remain actively engaged with the CRISA Committee, the ASISA RI Committee and the National Advisory Body for Impact Investing. Globally, we are members of UNPRI where we remain a member of the Global Reporting and Assessment Committee. Additionally, we are active members of the International Corporate Governance Network. 

As we move into 2020 we are committed to continuing to place responsible investment at the heart of our business, with an unrelenting focus on adding value to our clients’ portfolios, while at the same time contributing towards a future that matters. BM

To answer more of your investment related questions, contact us at [email protected] or visit https://www.oldmutualinvest.com/institutional/knowledge-room/media-and-insights for more news and insights.