1. The involvement required
A number of compliance regulations have been introduced in South Africa in recent years, which, while not binding as legislation, serve to provide guidance and to encourage commitment to the recommendation that retirement funds have a requirement for ESG in their investment mandates to asset managers.
This compliance requires boards of trustees to study investment policy statements, ensure the sustainability of investments and to set out disclosure and reporting. In addition, they are required to be stewards of the assets in their members’ fund portfolios; a noble idea in principle, but requiring far more involvement than one would assume.
2. A lack of confidence on the part of shareholders
Taking these requirements into consideration, it is no wonder that many shareholders lack the confidence to hold investee companies to account. In a poll conducted among 1 000 investors by The Share Centre, 79 per cent said that they do not attend the annual general meetings of the companies in which they invest. A third said that they do not vote on company resolutions, while around six in ten said they don’t feel their vote makes any difference. This lack of confidence and reluctance to participate in the stewardship of client assets points to a gap in meaningful engagement on the issue of responsible investment.
So, what is the solution?
Old Mutual Investment Group (OMIG) has run a fully-fledged Responsible Investment (RI) Unit for ten years, giving us a deep understanding that long-term system change requires alignment across the markets on core sustainability issues. The United Nations Sustainable Development Goals (UNSDGs) presents a workable framework to align the interests of society, capital providers, companies and governments. Considering this need for alignment, as well as the lack of meaningful shareholder engagement, Old Mutual Investment Group has launched its Listed Equity Stewardship programme, which aims to drive positive ESG outcomes on behalf of clients – at both a company and a market level – that ally with the UNSDGs and serve as a basis for fostering greater industry collaboration.
No matter what ESG strategy is employed, stewardship is central to delivering long-term outcomes. Globally, we have seen an increasing number of large asset owners consolidate their stewardship activities to ensure a consistent outcome and expect that South Africa will be no different, with more active investors, bigger societal voice and stronger legislative enforcement, to support greater demand for stewardship services.
What can Old Mutual Investment Group offer?
We recognise the complexity of stewardship and offer a specific focus on Responsible Investment (RI) and ESG. We built the RI unit and proprietary ESG screening models, and have automated most of the processes. As such, we have now built further capacity to offer the service to third parties, companies and asset managers alike.
OMIG’s engagement activities with companies focus on key strategy and performance issues such as remuneration policy, climate change, audit quality, board succession, corporate governance, risk management, privacy and data security, to name a few. In 2019 alone, we interacted with 31 companies on 93 material ESG issues. BM/DM
If you’d like to take this discussion further or have any other investment-related questions, please contact us at [email protected] or visit oldmutualinvest.com
This article was written by Robert Lewenson, Head of ESG Engagement
Robert Lewenson leads ESG Engagement at the Old Mutual Investment Group. He is responsible for proxy voting and engagement, representing Old Mutual Investment Group on various industry bodies and championing responsible investment for the Old Mutual group.
