Sanlam Investments has reiterated its ambition of becoming the African continent’s leading sustainable investment house. While the company’s impact aspirations are more broadly targeted towards the United Nations Sustainable Development Goals, the Alternatives business has a particular focus on three key pillars: job creation, reducing inequality and driving improved climate outcomes through strategic investing. 

Mervyn Shanmugan, CEO of Alternative Investments at Sanlam Investments, says asset managers are uniquely positioned to make a positive impact on the world by how they allocate capital and actively manage investments. “We have our eye firmly on the future. Embedded in every conversation, every strategy and every new idea is what our world could look like in the future.”

“We imagine what we’d like South Africa and the continent to look like in the next five to 10 years: many more quality jobs; far less inequality; robust and effective public-private partnerships which drive sustainable infrastructure development; a buoyant SME sector with access to flexible and affordable finance; and a just transition to clean energy.”  

Shanmugan says while the government plays a key role in reducing economic inequality through the redistribution of the country’s resources, private capital has a unique role to play in supporting this process. “We have the ability to channel funding to segments of society that need it most when traditional funding fails. That’s why effective partnerships between the public and private sector are so important.”

Alternative investments act as powerful vehicles that can enhance returns for investors as well as diversify a portfolio. “And they can do much more than that. Because alternative investments allow more control by the asset owners and closer relationships with their investee companies or projects, they offer a real opportunity to create tangible, measurable societal and environmental impact.”

The introduction of impact funds into private markets has enabled fund managers to think and behave differently when creating funds. “Previously, the considerations would be driven solely by return imperatives. Now, we’re able to include solutions to specific environmental or social problems in the fund construction process. Investors in these alternative asset classes are now also able to understand the impact that these opportunities can deliver by compelling their fund manager to measure and report on both impact and financial outcomes.”

“Given the extreme inequality in our country, South Africa in particular needs to embrace impact investing in order to reorganise capital in a way that uplifts our people and creates a world where they can grow and retire with dignity.”

Sanlam Investments’ journey to achieving its goals is already well underway

The Sanlam Investors’ Legacy Impact Range is one of the company’s flagship impact initiatives. It launched at the onset of the Covid-19 pandemic, to preserve jobs in the short term and create additional jobs over the following decade. To date, over R4 billion has been committed to job creation mandates to help activate economic growth in our country. A third of this amount has already been approved for investments which have the potential to impact the lives of more than 35 000 people.

One of the main channels for driving this job creation ambition is the company’s mid-market private equity fund. This fund has made substantial investments in the Cavalier Group, Absolute Pets and Q-Link, which is expected to create over 550 direct and 1700 indirect jobs. Cavalier primarily employs women from surrounding township areas and has created over 100 jobs since the investment in December 2020. Absolute Pets, South Africa’s largest specialist pet food retailer, has added 33 new stores since the fund’s investment in April 2021. This achievement is well above the 15-store per year target and has resulted in the creation of 140 new jobs. The majority of their employees (92%) are previously disadvantaged, with almost 70% being female and more than 65% under 35. Q-Link, a leading provider of payment application software, aims to grow their highly skilled, specialised and predominantly female employee base by almost 30%. 

Catalysing economic growth and addressing social inequality have been key focus areas of the company’s SME Debt team. The team has concluded over 100 successful deals since launching over a decade ago, helping local entrepreneurs with one of their biggest barriers to success: finance. Earlier this year, the business launched a South African SME Debt Fund in conjunction with the Eskom Pension & Provident Fund, focused on financing black-owned businesses across sectors, but prioritising manufacturing and agro-processing.

Through Climate Fund Managers – Sanlam Investments’ strategic partnership with FMO, the Dutch development bank – the business is responding to the climate crisis by raising, structuring and managing a series of blended finance vehicles each focused on investing into developing economies in key thematic areas of climate change mitigation and adaptation. Climate Investor One is using the USD950 million raised to finance and develop wind, solar and run-of-river hydro projects, while Climate Investor Two is USD 180 million shy of its USD 1 billion target which is being used to finance projects in the water, sanitation and ocean sectors.

Additionally, the Sanlam Investments Sustainable Infrastructure Fund launched in September 2021 and is investing in South African infrastructure projects that drive economic growth, market development and job growth, with an emphasis on environmental sustainability. The Fund has R1 billion in investor commitments to date.

Sanlam Investments is making its investments matter. Make your investment count by visiting our Alternative Investments page for more information on the fund. If you are ready to invest, email us.  DM/BM

By: Mervyn Shanmugan, CEO of Alternative Investments at Sanlam Investments